Australia’s latest employment figures appear to be good on the surface but the reaction among economists has not been unanimous. The ABS released employment estimates which indicated Australia’s unemployment rate fell from 5.9% to 5.7% in April. In some months the unemployment rate can drop purely because the participation rate falls. On this occasion, the participation rate was steady at 64.8 and the total number of people employed in Australia in either full-time or part-time work rose by 39,700, well above the market’s expectation of +5,000. However, despite more people working, total hours worked fell by 0.3% over the month, although over a 12 month period this figure grew by 1.3%, which is higher than the comparable figure from March (+0.7%).
Economists were mixed in their reactions to the figures. Andrew Hanlan, a senior economist at Westpac said “considerable” labour market slack exists and there would be little pressure for wages to increase. He also does not expect this rate of growth in employment numbers to continue. “Looking further ahead, in 2018, we expect the labour market to cool – as home building activity turns down and as China slows and commodity prices retreat further.” NAB senior economist David de Garis was more positive; he saw the figures as “another slice of evidence that the softness in the reported employment data is dissipating and importantly is catching up to more positive forward-looking indicators of the labour market.” He also thought employment numbers would continue to grow. “Looking forward, leading indicators of the labour market remain positive and the NAB Business Survey is suggesting employment growth averaging around 20,000 a month – enough to put downward pressure on the unemployment rate.” ANZ’s view was a little more circumspect than the NAB economist but still positive. David Plank, ANZ’s chief of Australian Economics said, ”Given the strength of labour market indicators from sources such as business confidence and ANZ Job Ads we are not overly surprised by the strength of the April jobs report, even if it was above our forecast. We think this could continue for a while yet, hopefully stemming the trend decline in consumer confidence seen since the start of the year.”
Bond yields were mixed in their reaction on the day. 3 year yields rose 1bp to 1.79% while 10 year yields fell 3bps to finish at 2.53% and the Aussie eased about 0.1 US cents to 74.20 U.S. cents.