Oz Labour Data Flat

Array
(
    [0] => Array
        (
        )

    [1] => Array
        (
        )

)

By Chris Shaw

After five consecutive months of upside surprises Australian labour force data were a little softer in February, delivering an essentially flat result with employment rising by just 400 positions for the month.

This compares to a rise for January of 56,500 jobs, so as Westpac notes it was actually the sixth consecutive monthly increase in the data. In trend terms it notes monthly employment growth accelerated to 1.7% for the year, up from an upwardly revised 1.4% in January.

ANZ economist Julie Toth notes the February figures showed some gains in full-time employment and a fall in part-time jobs, as evidenced by a 2.4% increase in aggregate hours worked in month-on-month terms.

This goes against the trend of recent months and equates to a conversion of around 11,000 part-time jobs into full-time positions. The numbers mean the Australian economy has added 197,800 jobs over the last six months.

With strong population growth continuing, Westpac senior economist Anthony Thompson notes the monthly net jobs requirement to keep the unemployment rate steady is now around 25,000 per month, so the small rise in jobs meant unemployment in February actually ticked higher to 5.3% from a downwardly revised 5.2% in January.

The participation rate fell in February to 65.2% from 65.3% in January, though Thompson suggests an expected acceleration in jobs growth in coming months is likely to be accompanied by higher participation rates.

This is likely to slow the downtrend in unemployment rate through the course of this year, but Thompson still expects the rate to move closer to 5.0% by year's end.

According to Toth, today's indication of continuing labour demand is encouraging for the Reserve Bank of Australia (RBA) but suggests it provides no impetus to bring its next interest rate rise forward to April without further strong evidence of accelerating activity in the economy.

Given this ANZ continues to expect the next rise in rates from the RBA will come in May, though Toth notes the odds of an April rate rise are now probably closer to 50% than they are to 25%. Thompson largely agrees, noting the bond market is pricing in about a 28% chance of a rate hike post the labour market data.

The Australian dollar fell slightly on the news but Thompson notes the market still looks happy to buy weakness in the currency.

Click to view our Glossary of Financial Terms