Daily Commentary BY THE CURVE TEAM –

Employment Trend Improving

19th of May, 2017

The RBA will be able to breathe a sigh of relief following another encouraging set of employment statistics released yesterday for the month of April. Following a run of softer than expected numbers, two solid months of gains have seen the trend employment growth and trend unemployment rate both start to turn in the right direction. I say there is still a large degree of uncertainty hanging over the validity of the headline numbers.

Building on last month’s revised 60,000 gain in total employment, the Australian economy added a further 37,400 jobs in April. To put that in perspective, it’s the equivalent of the US economy adding north of 1,000,000 jobs over the same period. The jobs growth resulted in a 0.2% fall in the unemployment rate to 5.7% after the participation rate remained unchanged.

Where it gets a little more murky, despite the solid growth, hours worked fell by an aggregate 4.3 million or 0.26%. You can see why it is hard to join the dots each month when the employment data spits out numbers like this.

Nevertheless we must follow the trend and the trend is saying that employment conditions are improving and that is a good thing. It all sits nicely with the leading indicators of growth, which have been pointed towards better outcomes for a number of months, more than the official statistics have been reporting.

One thing that may shed some light on the conundrum is the growing gap between the unemployment and underemployment rate, which is now at its widest level in more than 25 years. That also helps explain the divergence between full and part time employment growth coupled with the lack of wage pressures in the Australian economy.

David Flanagan

Director - Interest Rate Markets