For Thursday, November 15 the Australian Bureau of Statistics is scheduled to release employment data for the country at 19:30 EST (or Friday at 01:30 CET). This data can sometimes move the markets, or shift the overall trend if it comes in significantly out of line from expectations. Here’s a run-down of what it means for the markets, and what analysts are expecting.
There are a number of data series relating to employment that are released at the same time. The one to get the most attention is the unemployment rate because this has the most bearing on the currency. The unemployment rate released is seasonally adjusted.
If more people are employed, then they have more ability to buy goods, which means the economy is strong and is likely to remain strong. However, in the long run, this can lead to increasing inflation – especially when the unemployment rate falls to structural levels, and starts to show labor force tightness.
What this means is that it becomes harder for businesses to find employees, and they raise wages to keep good employees, or poach them off the competition. The rising salaries without a corresponding increase in productivity (which you’d have if people were finding new jobs) lead to higher inflation, due to the increased consumer demand and higher labor costs.
However, we must remember that the RBA doesn’t have a mandate regarding unemployment like the Fed does. Consequently, the data isn’t likely to affect the outlook of the famously conservative Reserve Bank; just indirectly in terms of its potential impact on inflation.
Exactly where the structural level is, is a matter of debate, but often it’s seen between 4-6%, and with Australia’s unemployment rate hovering in the 5% range over the last several months, it’s getting close to that level.
September’s unemployment rate came in at 5.0% (a major surprise over the 5.3% expected, despite missing forecasts on the number of jobs added), coming off from the most recent high of 5.6% in April. This is the lowest unemployment rate since early 2012.
Current expectations are that the rate will remain low at 5.1% for the month of October. In their last Monetary Policy Statement, the RBA expected employment by year end to be around 5.5%
As with any unemployment rate, sometimes the key to understanding the move is in the underlying data. A sudden increase in the unemployment rate might be easily explained, for example, by an increase in the number of people looking for work.
That data is released at the same time.
Participation rate: The participation rate has taken a bit of a breather since it’s peak at 65.8% in January, after climbing since mid-2016 The drop in participation has been contributing to keeping the employment rate low over the last couple of reporting periods. Consensus expectations are for the participation rate to come in at 65.5%, up from 65.4% prior.
Employment change: The number of jobs created last month came in at a surprising miss. As such, that data might be revised. However, analysts are still optimistic about Australia’s job creation ability, and forecast 20K new jobs added in October, up from the 5.6K of September.