Daily Commentary BY THE CURVE TEAM –

Employment Growth Catches Up

16th of June, 2017

The leading indicators of employment have been telling us for some time that employment outcomes should have been stronger than the trend was. The employment index from the NAB business survey, which has long been the best indicator, along with job ads were both much stronger than actual outcomes. The last three months has seen the gap between these indicators narrow as employment growth has awoken from its slumber.

Over the last three months, total employment growth has been in excess of 40,000 per month. The latest data release yesterday for May showed a growth of 42,000 for the month. Along with overall growth, we have seen an encouraging improvement in the mix of new jobs with full time employment picking up noticeably over the past three months.

To put the turnaround in employment growth into perspective, the economy has added 17,700 MORE jobs in the last three months alone, than it did in the prior 15 months. Full time employment is also up 112,900 over the past three months after falling by 15,000 over the previous 15 months.

The unemployment rate is also moving back in the right direction and is down to 5.5%, even after the participation rose slightly in May. The change in the trajectory of the unemployment rate will come with much relief for the RBA after it was heading towards 6% only a few months ago.

The Australian economy desperately needs this trend to continue in the hope that the slack in the workforce will be absorbed to the point that it helps lift wage growth off its lowest level in decades.

David Flanagan

Director - Interest Rate Markets