After a “jumbo” October employment result and an even bigger jump in November – both of which were met with slight scepticism in the market – analysts were generally expecting some sort of statistical reversal for the December employment figures. ANZ said prior to the release “we are due a softer print and expect employment to have remained broadly unchanged in the month” while Westpac said, “Actual jobs are running ahead of our indicators…However, December is normally a strong month in original terms so this leaves a level of caution.”
The ABS has now released the December Labour Force figures and they came in at a seasonally adjusted -1000, again higher than the market expectation of a 10k fall. The local bond market was largely unaffected by the numbers as spot 10 year bond yields rose a point immediately after the data release before reverting back while the story in the currency markets was a similar one. Cash rate markets increased the odds of a rate cut by June 2016 from 68% to 78%.
The labour force figures from late last year attracted a degree of scepticism from respected economists who questioned the sampling process. This latest result has also been questioned. AMP Capital’s chief economist Shane Oliver said the result was “unbelievably strong” given Australia’s 2.5% GDP growth rate although he conceded, perhaps jokingly, the growth in jobs may be from “low cost cafe jobs, perhaps”.
The unemployment rate remained steady at 5.8%, driven by a fall in the participation rate from 65.3% to 65.1% and a fall of 10.9k in the total number of unemployed people. While total employment fell, full time employment rose 17.6k while part time employment fell 18.5k. Total employment increased by 2.7% in the year to December while seasonally adjusted monthly hours worked in all jobs was effectively steady at 1645.2m hours and up 3.4% for the year.
Westpac’s Justin Smirk said, “While the December survey was a less upbeat update than we have seen in recent months, it is still a positive outcome and one that would give comfort to the RBA as they return from their summer recess…the improvement in the labour market has been the greatest in NSW where the unemployment rate has dipped to a national low of 5.2% and the state’s pace of employment growth is a very robust 4.4% which is consistent with a rebalancing of growth away from resources and towards services.”