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Jobless rate near 8-year lows
Female jobless rate at 11-year lows

Labour Force

Employment rose by 28,900 jobs in December – after increasing by 38,500 in November (previously estimated at +39,900). Full-time jobs fell by 300, but part-time jobs were up by 29,200. Economists had tipped an increase in total jobs of around 10,000.

The unemployment rate fell from 5.2 per cent in November in seasonally adjusted terms to 5.1 per cent in December. To two decimal places the jobless rate fell to 5.07 per cent – the lowest level in 10 months. The jobless rate also fell from 5.2 per cent in November to 5.1 per cent in December in trend terms.

Hours worked rose by 0.5 per cent in December to be up 2.3 per cent over the year. In trend terms, hours worked were up 1.7 per cent on the year.

Participation rate: The participation rate was steady at 66.0 per cent in December in seasonally adjusted terms. In trend terms the participation rate was also steady at 66.0 per cent.

Unemployment across states in December: NSW 4.5 per cent (November 4.6 per cent); Victoria 4.9 per cent (4.6 per cent); Queensland 5.7 per cent (6.3 per cent); South Australia 6.2 per cent (6.3 per cent); Western Australia 5.4 per cent (5.7 per cent); Tasmania 5.5 per cent (6.0 per cent). In trend terms, Northern Territory 5.6 per cent (5.5 per cent); ACT 3.1 per cent (3.1 per cent).

A raft of companies is affected by the employment data but especially those dependent on consumer spending.

What does it all mean?

• In December the jobless rate was 5.07 per cent, the lowest result since February 2019 (4.96 per cent). And that February figure was the lowest in almost 8 years – 4.92 per cent in June 2011.

• The latest job data will be a surprise to many. The general view is that the economy was drifting, that job gains will be hard to come by and that interest rates were set to fall further. But the reality is that jobs are being generated – and being created by enough to push the jobless rate lower. Further, the number of hours worked in the economy continues to rise and while more people are looking for jobs, indeed they are actually finding positions.

• The Reserve Bank indicated that interest rates would fall further if the jobless rate rose. Well, the jobless rate is falling rather than rising, suggesting that official rates may be left unchanged – at least for now. The good news is that recent forward-looking job market measures have been positive – notably job vacancies from the Bureau of Statistics and skilled job vacancies from the Department of Employment.

• Some may say that the job figures are weaker than they appear because job creation was centred on part-time positions. But ahead of the signing of the US-China ‘Phase one’ trade deal it is likely that many businesses would have been cautious – employing part-time staff until there was clarity on trade.

• Policymakers will probably spend extra time in coming months in looking more closely at the domestic economic ‘small picture’ rather than the ‘big picture’. The interest is in determining the ‘hot’ and ‘cold’ areas of the economy and determining what can or should be done on getting more regions and industries running at a stronger pace.

• Financial markets were divided on whether rates will be cut in February 2020. While there is still the inflation data to be hurdled next Wednesday, financial markets have scaled back the chances of a February rate cut from 60 per cent to 25 per cent since the release of the jobs data. The Aussie dollar rose from US68.4 cents to US68.7 cents after the release of the jobs data.

• The Australian Bureau of Statistics (ABS) said that disruption to data collection caused by bushfires “did not result in any impacts to Labour Force statistics.”

What do the figures show?

• Employment rose by 28,900 jobs in December – after increasing by 38,500 in November (previously estimated at +39,900). Full-time jobs fell by 300, but part-time jobs were up by 29,200. Economists had tipped an increase in total jobs of around 10,000.

• The unemployment rate fell from 5.2 per cent in November in seasonally adjusted terms to 5.1 per cent in December. To two decimal places the jobless rate fell to 5.07 per cent – the lowest level in 10 months. The jobless rate also fell from 5.2 per cent in November to 5.1 per cent in December in trend terms.

• Hours worked rose by 0.5 per cent in December to be up 2.3 per cent over the year. In trend terms, hours worked were up 1.7 per cent on the year.

• Participation rate: The participation rate was steady at 66.0 per cent in December in seasonally adjusted terms. In trend terms the participation rate was also steady at 66.0 per cent.

• Unemployment across states in December: NSW 4.5 per cent (November 4.6 per cent); Victoria 4.9 per cent (4.6 per cent); Queensland 5.7 per cent (6.3 per cent); South Australia 6.2 per cent (6.3 per cent); Western Australia 5.4 per cent (5.7 per cent); Tasmania 5.5 per cent (6.0 per cent). In trend terms, Northern Territory 5.6 per cent (5.5 per cent); ACT 3.1 per cent (3.1 per cent.

• State/Territory jobs: In seasonally adjusted terms, in December 2019, the largest increases in employment were recorded in New South Wales (up 20,600 people) and Victoria (up 10,300 people). The largest decrease was in Western Australia (down 5,300 people).

• The working age population rose by 23,500 in December to 20.73 million. Over the year, the working age population rose by 333,700 or 1.64 per cent. But this is still down from the record 2.36 per cent annual growth in December 2008.

• In trend terms, the monthly underemployment rate remained steady at 8.3 per cent. The monthly underutilisation rate remained steady at 13.5 per cent.

• In seasonally adjusted terms, the monthly underemployment rate was steady at 8.3 per cent. The monthly underutilisation rate fell by 0.1 points to 13.4 per cent.

What is the importance of the economic data?

• 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.
Historical Highlights

• Female unemployment rate 4.9 per cent (seasonally adjusted) lowest since January 2009;

• Female participation rate 61.2 per cent (sa & trend) equal record high;

• Female jobs accounted for 67 per cent of jobs created in the past year;

• Queensland unemployment rate 5.7 per cent (sa) 10 month low;

• Western Australian unemployment rate 5.4 per cent (sa) 4½ year low (May 2015);

• ACT unemployment rate 3.1 per cent (trend) equal near 11-year low (February 2009);

• Tasmanian unemployment rate 5.5 per cent (sa) 14-month low.

What are the implications for interest rates and investors?

• The job market is in better shape than generally assumed. And this is no fluke, as the historical highlights show in terms of region and gender. Other states are trying to close the gap with NSW and Victoria.

• The hope is that the job market will continue to tighten, and this will serve to push up wages and prices. The Reserve Bank can stay on the sidelines for now. But clearly the level of interest rates is already super-stimulatory.

• We will have to wait two months to get industry estimates of employment and unemployment. Some may claim that the rise in part-time jobs in November and December reflects hiring in the retail sector. It may. Certainly the jobs data is adjusted for normal ‘seasonal’ reasons. But the change in shopping trends in favour of Black Friday/Cyber Monday in November ahead of traditional Christmas sales in December has played havoc with seasonal factors.

• Attention now shifts to the inflation data to be released next Wednesday. Most economists expect the data to show inflation to be well contained below the Reserve Bank’s 2-3 per cent target band.

• Commonwealth Bank Group economists expect no change in interest rates at the February 4 Reserve Bank Board meeting.

Published by Craig James, Chief Economist, CommSec