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Here's what economists are saying about Australia's jobs report

David Scutt
  • Australia's November jobs report offered something for everyone.
  • Most economists agree it was a solid outcome in what's been a solid year for the labour market.
  • None believe the report has any immediate implications for RBA monetary policy settings.

Australia's jobs report for November offered something for everyone.

For the optimists, employment jumped by 37,000, nearly double the increase expected. Labour force participation rose strongly and the employment to population ratio also increased, indicating that stronger job market conditions are encouraging people to work or look for work.

However, for the pessimists, unemployment ticked up to 5.1% against expectations for a steady outcome. All of the jobs created were also part-time positions, masking a small decline in full-time workers. Underemployment and undertutilisation levels also rose, indicating there's still a whole lot of underutilised workers still out there. This suggests wage growth is likely to remain weak.

As we said, there was something for everyone in November.

But what are the economists saying?

Here's a collection of view we've received so far.

Tom Kennedy, JP Morgan

Australia’s labour data has been the obvious bright spot in an otherwise soft patch on the domestic data front in recent months, and today’s uptick in the jobless rate and generally weaker composition makes the domestic narrative a little more uniform in its interpretation. The shift in momentum in the labour data, while subtle, is now more consistent with the lackluster Q3 GDP print and our medium term view that annual real GDP growth will decelerate from here.

Having outperformed expectations earlier in the year, Australia’s leading labour market indicators have turned less favorable of late, most notably the ANZ job advertisements series and the employment /capacity utilisation metrics published in the NAB business survey. Although far from perfect correlates, these measures tend to capture directional shifts in the unemployment rate, and current readings in our view are consistent with unemployment stabilizing or moving slightly higher. Given these metrics and our view that real GDP growth will slow in 2019, we expect the unemployment rate to stay above 5% in the coming year.

There are no immediate implications for monetary policy from today’s release. Stability in the unemployment rate around these levels offers the RBA flexibility to adjust policy to any future activity/financial stability shocks should that be necessary.

Felicity Emmett, ANZ

This was another solid labour force report with a large gain in employment, building on the previous month’s gain. While a number of labour market indicators have eased recently, they still suggest further job gains and a gradual decline in the unemployment rate.

The tightening in the labour market is feeding through to better wage outcomes, with average wage rises in EBA’s approved in Q3 rising from 2.7% to 3.2%. This is good news as it will support households feeling the pinch from falling house prices.

The RBA will likely be pleased with the evolution of the labour market data. With house prices continuing to fall and concerns over the extent and duration of credit tightening, strong employment and rising wages growth are necessary preconditions for ongoing moderate growth in consumption.

Belinda Allen, Commonwealth Bank

The RBA will likely be pleased with the evolution of the labour market data. With house prices continuing to fall and concerns over the extent and duration of credit tightening, strong employment and rising wages growth are necessary preconditions for ongoing moderate growth in consumption.

The leading indicators for employment continue to point to solid jobs growth of around 20,000 over coming months. GDP growth is around potential and with employment growth continuing to track above population growth the unemployment should drift lower.

Both the government and the RBA have the unemployment rate tracking lower to 4.75% over the next year. The strength in the labour market continues to help offset the falls in dwelling prices and will see the RBA maintain its view of the next move in rates is up, eventually, in contrast to recent market pricing of a small chance of a cut.

Justin Smirk, Westpac

More surprising was the jump in the unemployment rate to 5.1% from 5.0% due to a lift in participation to 65.7% which drove a solid gain in the labour force.

It does appear there sample volatility had a role to play with the ABS noting that the incoming rotation group had a higher employment to population ratio than the group it replaced while the unemployment rate of the incoming rotation group was also higher than the whole sample and the group it replaced. Also the participation rate of the incoming group was higher than the group it replaced. As such we would not define the November rise in unemployment as a softening in labour market conditions.

This update on the labour market would give the RBA some comfort on how the Australian economy was tracking heading into the festive season.

Shane Oliver, AMP Capital

Solid jobs growth will benefit consumers through higher aggregate household income, as well as boosting consumer sentiment. However, there are some signs in job advertisements that have slowed substantially that jobs growth will slow going forward and there is still a large amount of labour market slack which will act as an ongoing constraint on wages growth. Meanwhile, the Australian consumer continues to face headwinds due to the ongoing housing market correction and a savings rate that is already extremely low.

There is no change to our view that the RBA will cut interest rates next year but not until the second half.

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