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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Thursday, 20 October 2016

Jobs stinker (U.G.L.Y.)

Stinker

I was just thinking overnight that we haven't had a wild Labour Force reading for a little while, but right on cue...

Total employment was down moderately by -9,800 in seasonally adjusted terms in September to 11,947,200, a fair miss against market expectations of +15,000, while the month of August also saw an adverse revision.


But it was the mix that was the real stinker, with full-time employment decreasing by -53,000, while part-time employment increased by +43,200. 

While the monthly numbers aren't to be taken literally, we haven't seen a monthly reading as bad as that for full-time jobs in more than half a decade.

More worryingly, the survey suggests that full-time employment has declined by -112,000 over the first nine months of the calendar year, from above 8.2 million to 8.1 million - basically reversing an equivalently sized gain in full-time employment over the same period last year. 

Another worthwhile gauge is to look at the annual rate of employment growth which has slowed to +1.4 per cent in seasonally adjusted terms (+163,000 jobs), the weakest result in 17 months and now about in line with the annual percentage rate of population growth. 



Total hours worked ticked +0.2 per cent higher in September to be just +0.3 per cent higher than a year ago, while the participation rate eased from 64.7 per cent to 64.5 per cent. 

Overall, there was some uncertainty through this period, in part due to the 'Brexit' referendum in Britain, but even so, this was a poor result which disappointed the market.

On the plus side, the ABS job vacancies survey does suggest that hiring will probably recover over the last few months of the year. 

Unemployment rate at a 39-month low

The Reserve Bank of Australia (RBA) implied this week that there is still plenty of slack in the labour force, and the unemployment rate of 5.6 per cent was about half a percentage point above where it sees the level of 'full employment'. 

One piece of mildly positive news is that the seasonally adjusted unemployment rate of 5.57 per cent in September was the lowest in the 43 months since February 2013. 


Moreover, anyway way you look at it the unemployment rate is better where it is at 5.57 per cent than the 6.32 per cent that was nudged in early 2015.


At the state level, only one state has an unemployment rate at the level the Reserve Bank would deem to be near full employment (you can add in the territories here if you like). 

The unemployment rate in New South Wales is now at a 4-year low of 4.9 per cent, with the state adding +6,700 jobs in September. 



In Queensland the unemployment rate declined from 6.2 per cent to 6.0 per cent in September.

The wrap

Plenty of people have been wondering whether the new Reserve Bank Governor would consider cutting rates lower than they already are.

A speech this week confirmed that the answer is a qualified yes, if reluctantly, should inflation look to be softening further. 

With the pace of employment growth slowing considerably, the 'door is open' to another interest rate cut this year, as they say.

However, reading between the lines there would probably be need to be a particularly soft inflation reading for the September quarter to trigger an interest rate cut (meaning an underlying inflation figure being below the target range in Q3, so ~0.4 per cent or lower).

We'll find out the answer to that conundrum next Wednesday!

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If the numbers didn't seem very believable, then the ABS has noted the following: