Looking for signs of stability in the labour market: Westpac's Justin Smirk
GUEST OBSERVER
The February Labour Force Survey was a disappointing update on the Australian labour market reporting a fall in total employment along with unemployment rising to its highest level in 15 months.
So far in 2017 the labour market has been quite a bit softer than we had anticipated.
In February total employment declined 6.4k and the annual was flat at 0.9 percent/yr holding well under the pace that our Jobs Index suggests it should be – circa 1¾ percent/yr and accelerating to around 2¼ percent/yr by late 2017.
The ABS notes that in the February survey sample rotation may explain some of the weakness in the month. In March if the sample rolling in is more like the average of the total sample then this would result a bit of a positive bump. But sample volatility does not explain the weakness seen over the last three months.
Our 20k forecast for March holds the annual pace at 0.9 percent/yr but we note that changing seasonality increases the risk to this forecast.
In February, the rise in full-time employment was not a positive sign as it did not broken the recent trend for a greater focus on part-time employment. In addition the weakening in hours worked further emphasised that labour demand is somewhat weaker than what the business surveys suggest.
The –6.4k decline in employment in February was reported with a 19.5k jump in the labour force due to a flat participation rate of 64.6. This is why the unemployment rate jumped 0.2ppt to 5.9 percent (5.87 percent unrounded).
In March, if participation holds steady, a 20k gain in employment will be enough to hold unemployment rate steady at 5.9 percent.
Weak hours worked in late 2015 were something of an early warning of the soft patch in employment. In January we had found it very promising that hours worked per employee lifted 0.8 percent in the two months to Jan. Since then hours worked have pulled back so we are again closely watching to see if this is presaging a further slowdown in employment.
We also note a small lift in employees who expect to lose their job due to their employer closing. This series can lead changes in the unemployment rate.
Justin Smirk is senior economist, Westpac Group and can be contacted here.
