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.