Labour Force Survey — October | By the numbers
- Total employment increased by 32,800 in the month, well ahead of the market forecast for a 20,000 addition. September's initially reported increase of 5,600 was revised up to 7,800.
- The seasonally adjusted unemployment rate held at 5.0%, with the market expecting a lift to 5.1%
- Participation rate lifted 0.1ppt to 65.6% (mkt f/c 65.5%). There was an upward revision to the previous month from 65.4% to 65.5%.
- Total hours worked in October increased by 0.3% to 1.764bn hours (+2.1%Y/Y)
- Underutilisation rate remained at 13.3%, while the underemployment rate was also unchanged at 8.3%
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Labour Force Survey — October | The Details
The labour force saw the addition of 37,400 workers in October, which resulted in the participation rate ticking up to 65.6% on a seasonally-adjusted basis. Meanwhile, the economy added 32,800 jobs in the month, of which 42,300 were on a full-time capacity trimmed by a 9,500 fall in part-time positions. While the unemployed total did lift marginally (+4,600) the unemployment rate was unchanged at 5.03% from 5.01% last month.
The pace of employment growth has moderated from the very strong level seen late last year that extended into the early months of 2018 but continues to remain robust at around 2.5% on an annual basis and is well above the rate of growth in the working-age population (at around 1.6%Y/Y). The decline in the nation's unemployment rate over 2018 and participation rates holding around historic highs is, therefore, a logical outcome.
Notwithstanding this, excess capacity in the labour market remains persistent and is most likely a key factor in ongoing softness in wages growth (see here for our analysis on yesterday's Q3 Wage Price Index data). The underemployment rate (workers that want more hours) held at an elevated 8.3% in October and the underutilisation rate (combining the underemployed and unemployed) remained at 13.3%.
The total number of hours worked in October increased by 0.3% and by 2.1% over the past year. Adjusting for the increase in employment, average hours worked per employee were little changed in the month at 139.2 hours, which is slightly weaker than at the same point 12 months ago (139.8 hours) but is also not surprising given that employment growth in absolute terms has picked up by more than 300,000 over that time.
Across the states, the headline addition to national employment of 32,800 was split as follows; New South Wales +16.3k, South Australia +7.7k, Western Australia +3.1k, Tasmania +2.3k, Queensland -3.2k and Victoria -3.5k. The month-to-month outcomes are volatile, but as we have previously highlighted, employment growth on a quarterly and annual basis in New South Wales and Victoria continues to run well ahead of the other states.
While that is not unusual given that New South Wales and Victoria account for well over half of Australia's labour force, a simple comparison of state unemployment rates shows a disparity in conditions relative to the other states. However, unemployment rates in Western Australia, South Australia and Tasmania have declined over the past year. Queensland's unemployment rate has drifted higher.
The unemployment rates across the states in October are; New South Wales 4.5% (flat), Victoria 4.5% (-0.1ppt), Queensland 6.3% (+0.3ppt), Western Australia 5.7% (-0.3ppt), South Australia 5.4% (-0.1ppt), and Tasmania 5.3% (-0.4ppt).
Labour Force Survey — October | Insights
Overall, this was a strong report which came in clearly ahead of expectations on the two highlight indicators being employment growth and the unemployment rate. While the pace of employment growth has eased, it is still running above growth in the working-age population, which is likely to place further gradual downward pressure on the unemployment rate. This is consistent with the Reserve Bank of Australia's most recent forecasts where it lowered its outlook for the unemployment rate over the next couple of years to 4.75% by the end of 2020.
