Preview: Labour Force Survey -- May

The ABS is due to release its Labour Force Survey for May at 11:30am (AEST) today. The previous survey confirmed a rise in the national unemployment rate to 5.2%, which led to last week's decision by the Reserve Bank of Australia (RBA) to cut the cash rate by 25 basis points to 1.25% in order "to support employment growth" and to shore-up its inflation outlook.   


As it stands | Labour Force Survey 

In April, net employment increased by 28,400 in seasonally adjusted terms; well ahead of the median forecast for a rise of 15,000. The compositional detail showed full-time employment decreasing by 6,300 and part-time work rising by 34,700. Employment growth in annual terms increased from 2.44% to 2.58%.  

Despite strengthening employment growth, the unemployment rate lifted to 5.2% from an upwardly revised 5.1%. That was due to the participation rate increasing by 0.1ppt to a record-high 65.8%. The broader measures of excess capacity lifted for the second consecutive month; underemployment rate up by 0.3ppt to 8.5% and the underutilisation rate rising by 0.4ppt to 13.7%.

Aggregate hours worked lifted by 0.1% in April and by 1.9% over the year maintaining its upward trend reflecting strength in participation and employment growth. 

For a full review of April's report see here


Market expectations | Labour Force Survey 

For today's report, the median forecast according to Bloomberg is for employment to rise by a net 16,000, though estimates range substantially from +1,000 to +50,000. The unemployment rate is forecast to ease from 5.2% to 5.1% around a wide range from 4.9% to 5.3%. The workforce participation rate is expected to hold at 65.8% in between a range from 65.7% to 65.9%. All in all, the median forecasts indicate today's report is expected to gain a pass mark. 

What to watch | Labour Force Survey

Last week's RBA rate cut was to a large extent driven by a lack of progress being made in reducing excess capacity in the labour market. Most attention will centre around the unemployment rate as well as the underemployment and underutilisation rates. Achieving progress here will depend very much on the pace of employment growth given that the workforce participation rate is now at a record high. For now, the pace of employment growth is robust at 2.58% in annual terms to April, though the forward-looking indicators suggest that is likely to soften in the months ahead.