Summary: Employment expands in August; July job gains revised up slightly; employment number rises in contrast to expectations; participation rate ticks up; fewer unemployed, larger available workforce sends jobless rate from 7.5% to 6.8%; Victorian employment, hours worked likely to fall further; part-time, full-time jobs both up; work hours rise less than employment over the month; underemployment rate unchanged; economists divided on outlook.
Australia’s period of falling unemployment came to an end in early 2019 when the jobless rate hit a low of 4.9%. It then averaged around 5.2% through to March 2020, bouncing around in a range from 5.1% to 5.3%. Leading indicators such as ANZ’s Job Ads survey and NAB’s capacity utilisation estimate suggested the unemployment rate would rise in the June quarter and it did. More recent readings suggested the unemployment rate may have peaked, although recent readings are less clear.
The latest Labour force figures have now been released and they indicate the number of people employed in Australia increased by much more than economists had expected. The report showed the total number of people who held a job according to ABS definitions rose by 111,000 in August. The rise was a little less than July’s 119,200 increase after it was revised up from 114,700 but in marked contrast to the 35,000 loss which had been generally expected.
“Without a doubt, the recovery in the rest of the country has been more robust so far than we thought while the hit to the Victorian labour market was not as bad as expected,” said Westpac senior economist Justin Smirk.
Domestic Treasury bond yields fell by modest amounts along the curve, ignoring upward movements by their US counterparts in overnight trading. By the end of the day, the 3-year ACGB yield had slipped 1bp to 0.27%, the 10-year had shed 3bps to 0.89% while the 20-year yield finished 2bps lower at 1.48%.
In the cash futures market, expectations of a lower actual cash rate, currently at 0.13%, remained largely unchanged. By the end of the day, contracts implied the cash rate would trade in a range of 0.090% to 0.105% through to the end of 2021.
The participation rate ticked up from July’s revised level of 64.7% to 64.8% as the total available workforce expanded by 24,500 to 13,505,200. The number of unemployed persons decreased by 86,500 to 921,800; the lower unemployment number in conjunction with a higher number of people in the workforce led to the unemployment rate dropping from 7.5% to 6.8%.