Australia: Unemployment rate drops further – Westpac

Simon Murray, Research Analyst at Westpac, notes that Australia’s total employment rose by 3.7k in October, below Westpac and the market’s expectation of +20k and +18.0k respectively.

Key Quotes

“September’s result was also revised up to 26.6k from 19.8k. Notably, the unemployment rate fell further to 5.4% in October. That is a low going back to February 2013 but is still above most estimates of full employment of around 5.0%. This month’s unemployment rate fall also relates to a drop in the participation rate to 65.1% from 65.2% due to lower male participation, down from 70.7% to 70.5%. The overall participation rate drop appears to be concentrated in Vic, down to 65.7% from 66.3%, back to near the level seen in February this year. A possible cause could be the rolling of the sample.”

“Though the total employment gain in the month was low at 3.7k, hours worked rose by a more reasonable 0.3%. This relates to 24.3k increase in full-time employment, which was mostly offset by a 20.7k decrease in part-time employment. Over the past year, total employment is up 3.0%yr with full-time employment increasing 3.7%yr and part-time employment increasing 1.5%yr.”

“National underemployment

• The underemployment rate is still high at a national level. In original terms, it is at 8.2% as at the October release but we only get seasonally adjusted estimates on a quarterly basis - August 8.6%. The original monthly numbers indicate that October has maintained September’s dip to 8.2% from 8.5% in August.
• However, the previous three years of original underemployment data has showed a seasonal dip around October, and so it will be particularly interesting to see if November’s seasonally adjusted print shows underemployment as low as the original figure.”

“Overall, while October’s headline employment gain was weaker than expectations, the continued gain in full-time jobs is a solid outcome. Forward indicators remain positive, namely the business surveys and job ads, pointing to robust momentum in employment in the near-term. The drop in the unemployment rate to 5.4% is now equal to a low seen in February 2013. However, with estimates of full employment being around 5.0%, there is still slack in the labour market. Further to that, the underemployment rate is still elevated. That slack is still clearly evident in the subdued wages growth figure of 2.0%yr we saw yesterday, though structural factors are also likely to be holding wages growth near historic lows.”