Australia | Sep 10 2009
By Chris Shaw
August labour force figures for Australia disappointed the market as while expectations were for a decline of between 12,000-15,000 jobs the actual fall was 27,100, driven by a fall of 30,800 in full time positions that an increase of 3,800 in part-time positions could not offset.
ANZ Banking Group economist Riki Polygenis notes the job losses for the month were concentrated in New South Wales, South Australia and Tasmania, while both the Northern Territory and Australian Capital Territory posted small falls as well. In terms of the age group most affected, Commonwealth Bank senior economist Michael Workman notes 15-24 year olds have been the big losers as their employment levels have fallen by around 4.7% or 88,000 jobs since the market peaked.
Along with the ongoing rotation from full-time to part-time jobs, the other trend evident in the data was the ongoing reduction in hours worked, this measure falling 0.5% for the month to be down 2.5% over the past year. As Westpac notes, this outcome shows the focus for employers remains reducing labour inputs via hours worked rather than outright job losses, as the August numbers were the 13th month in a row this measure has declined.
In the bank’s view, the weakness in hours worked continues to imply a drag on household incomes beyond that indicated by the actual unemployment rate, which held steady for the month at 5.8% against expectations of an increase to 5.9% thanks only to a decline in participation rate to 65.1% from 65.3% previously.
Polygenis sees the lower participation rate as a sign weaker employment prospects are starting to impact on the number of people actively looking for work, while Westpac suggests when the labour market actually picks up it will firstly be via an increase in hours worked, so delaying a transition to net outright job gains. Given the bank expects it will take some time before aggregate employment growth is strong enough to offset labour force growth, unemployment should continue to rise until mid-2010 in its view.
CBA’s Workman is forecasting the first quarter of 2010 as the peak for unemployment as by that time he sees economic growth as being strong enough to push the monthly job numbers to gains rather than losses. This matches his timetable for a first move higher in interest rates by the Reserve Bank of Australia (RBA), while as Polygenis notes today’s data has reduced the chance of an October hike as some in the market had been forecasting.
The reaction of currency and bond markets suggests a similar view, Westpac noting the dollar fell away immediately after the labour force figures were announced and bonds rallied as the chance of a rate hike next month declined. In the bank’s view US$0.8550/86c will be a key level for the Australian dollar shorter-term as a fall through this support band would suggest a further correction in subsequent sessions.