Independent Australian and global macro analysis

Wednesday, October 16, 2019

Preview: Labour Force Survey — September

Australia's key Labour Force Survey for the month of September is due to be released by the ABS at 11:30am (AEDT) today. Employment is expected to increase moderately in the month, while the unemployment rate is forecast to remain at 5.3%.   

As it stands Labour Force Survey 

Following a much stronger-than-expected outturn in July, employment surprised to the upside in August rising by a net 34.7k compared to the consensus forecast for +15k. The annual pace of employment growth remains robust at 2.5%, while the 6-month annualised pace lifted from 2.2% to 2.6%, though the 3-month annualised pace eased from 2.4% to 2.2%.




For the 4th time in the past 5 months, the workforce participation rate saw a new record high after lifting from 66.1% to 66.2%. This equated to the workforce increasing by 38.8k in August, and as that outpaced the rise in employment of 34.7k, the unemployment rate increased from 5.2% to 5.3% to be at its highest level in a year. Broader measures of spare capacity also increased, with the underemployment rate rising from 8.4% to 8.6% and the underutilisation rate lifting from 13.7% to 13.8%.



Aggregate hours worked lifted by 0.2% in August, which saw the annual pace tick up from 1.9% to 2.0%. However, after adjusting for the strong increase in employment in the month, average hours worked per employee in August were flat at 137.9 hours to be down by 0.4% on the level from a year ago.   

Market expectations Labour Force Survey 

In today's report, the median forecast according to Bloomberg's survey of economists is for employment to rise by 15,000 in September, with individual estimates ranging from -11,000 to +32,000. The unemployment rate is anticipated to remain at 5.3% between a range of 5.2% to 5.4%, while the participation rate also expected to hold steady at 66.2%. 




What to watch Labour Force Survey

The Reserve Bank of Australia's policy-setting Board continues to observe a labour market with an elevated level of spare capacity. This was reiterated as recently as Tuesday earlier this week in the mintues from the October meeting, which noted
; "The unemployment rate had been around 5¼ per cent since April and the underemployment rate had remained above its recent low point". After cutting rates in June, July and October, the October minutes highlighted a preparedness to ease the cash rate further "if needed" to support GDP growth strengthening to trend, full employment and inflation returning to the 2-3% target band. Key in today's report will be the headline unemployment rate after it lifted to a 12-month high of 5.3% in August. Markets are pricing in around a 40% chance of a 25 basis point rate cut in November, though if the unemployment rate were to show another deterioration in September this could firm to well above 50%, while the Australian dollar would also come under renewed pressure.