The Experts

First phase of job market recovery

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Jobs up: Employment rose by 1,100 in October after a revised 3,300 lift in jobs in September (previously reported as a 9,100 increase in jobs). Full-time jobs fell by 27,900 in October and part-time jobs rose by 28,900.

Unusual disparity.
If you add up job gains across the states, employment was up by 19,000, rather than up 1,100 as reported in the estimate for “Australia.”

Jobless rate unchanged. The unemployment rate was unchanged at 5.7 per cent in October from an upwardly-revised level of 5.7 per cent in September. The participation rate was steady at 64.8 per cent.

Hours worked rose. The number of hours worked rose by 0.4 per cent in October to record highs and is up 2.0 per cent over the year.

Unemployment across states and territories: NSW 5.9 per cent (5.6 per cent in September); Victoria 5.9 per cent (5.8 per cent); Queensland 5.9 per cent (5.9 per cent); South Australia 6.6 per cent (6.0 per cent); Western Australia 4.3 per cent (4.6 per cent); Tasmania 7.9 per cent (8.2 per cent); Northern Territory 5.3 per cent (5.3 per cent); ACT 4.4 per cent (4.2 per cent).

A raft of companies is affected by the result but especially those dependent on consumer spending. Amongst stocks affected are Fairfax, West Australian Newspapers, Seek Limited, McMillan Shakespeare and Skilled Group.

What does it all mean?

It is still early days in the re-awakening of the Australian economy. Confidence has lifted after the election and the housing sector is showing more signs of life. But it will be a few months yet before businesses are confident enough about future prospects to take on more full-time staff. Companies generally respond to better times by working staff longer hours, then take on more casual or part-time staff. And when businesses are then confident that better times are here to stay, they will be confident about hiring full-time staff. This takes time. Approval must be granted to hire more staff, ads need to be prepared, interviews conducted and then successful candidates advised. It may then take up to a month for the new workers to take up their positions.

Existing staff are working longer hours. And part-time jobs are being added at the expense of full-time staff. But there should be a switch to hiring of full-time staff late this year and early in 2014.

The jobless rate is at or near peak levels. As activity in the housing market gathers pace and broadens, more workers will be required. Employment is a lagging indicator – it is one of the last areas to improve as economic activity strengthens. The Reserve Bank will be happy to stay on the interest rate sidelines.

Despite the apparent small rise in jobs nationally, four states and the Northern Territory posted solid job gains in the month. There are suggestions that the overall job market figures are firmer than generally perceived. The fall in the youth jobless rate is part of the good news mix.

What do the figures show?

Labour force

Employment rose by 1,100 in October after posting revised job growth of 3,300 in September (previously reported as a 9,100 lift in jobs). Full-time jobs fell by 27,900 in October, offset by a 28,900 lift in part-time jobs.

The annual employment growth rate was steady at 0.8 per cent in October.

The unemployment rate was steady at 5.7 per cent in October after an upwardly-revised reading of 5.7 per cent in September (up from 5.68 per cent to 5.74 per cent). The participation rate was steady at a 7-year low of 64.8 per cent in October, but it still isn’t far from the record high of 66 per cent.

The number of hours worked rose by 0.4 per cent in October to be up 2.0 per cent over the year.

Unemployment across states and territories: NSW 5.9 per cent (5.6 per cent in September); Victoria 5.9 per cent (5.8 per cent); Queensland 5.9 per cent (5.9 per cent); South Australia 6.6 per cent (6.0 per cent); Western Australia 4.3 per cent (4.6 per cent); Tasmania 7.9 per cent (8.2 per cent); Northern Territory 5.3 per cent (5.3 per cent); ACT 4.4 per cent (4.2 per cent).

Victoria recorded the biggest job gains in October. Jobs rose by 14,200 in Victoria, followed by Western Australia (up 6,600), NSW (up 3,800) and Tasmania (up 900). Jobs fell most in South Australia (down 5,900) followed by Queensland (down 600). In trend terms jobs rose by 200 in the Northern Territory but fell by 400 in trend terms in the ACT.

The youth jobless rate fell from 17.6 per cent to 17.1 per cent in October and is below the October 2012 estimate of 17.2 per cent. The unemployment to population ratio (looking for full-time work), fell from 4.3 per cent to 4.1 per cent.

The working age population rose by 29,500 in the month and was up by 338,100 over the year (most in 45 months).

Why is the data important?

The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.

If more people are employed, then there is greater spending power in the economy. But at the same time companies may adjust the work hours of employees. If employees work less hours, and therefore get paid less, then spending power in the economy is reduced.

What are the implications?

Home building is rising, leading to job creation across a raft of sectors. Provided there are new fresh shocks from abroad, the job market recovery will broaden through 2014.

The Reserve Bank can be content to stay on the interest rate sidelines. Financial markets also now see just a 9 per cent chance of a rate cut in December.

Published: Friday, November 08, 2013

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