As it stands | Labour Force Survey
For the third consecutive month employment surprised to the upside of market expectations, with May's report showing a net increase of 42,300 jobs that accelerated past the median forecast for a rise of 16,000. April's outturn was equally impressive rising by 43,100 compared to the consensus call of 15,000. Employment growth continues to strengthen, with the annual pace rising to 2.9% in May; up from 2.6% in the previous month and 2.2% at the end of 2018. In response, workforce participation has been lifting in kind and reached a new record high of 66.0% in May.
Thus, the unemployment rate held at 5.2% in May, disappointing an expected fall to 5.1%, while underemployment drifted from 8.5% to 8.6% and underutilisation remained at 13.7%. As was the case in April, strong participation and employment outcomes were unable to generate a rise in aggregate hours worked; falling by 0.3%, while a base effect saw the annual pace lift to 2.1%. For a full review of May's report see here
Employment is expected to moderate in June, with the median forecast situated at +9,000 between a range from -10,000 to +24,000. Absent revisions to previous months, the unemployment rate is expected to hold at 5.2% for the third straight month, though there are some estimates for a decline to 5.1%.
With little change expected in the unemployment rate, the focus will turn to employment growth. Expectations are set low ahead of today's release; the forecast for 9,000 jobs to be added into the economy in June is the lowest consensus call from economists since December 2017 and is well below the 15,000 to 20,000 range usually predicted. The shift down in expectations can be explained by two factors.
Firstly, statistical volatility may help to explain the very strong employment outcomes from April and May -- the incoming sample group on both occasions had an employment to population ratio that was higher than the group they were replacing and above that for the overall sample. Meanwhile, the same characteristic was held by the group that concluded its involvement in the survey in May. Thus, economists have seemed to have concluded that, on balance, employment is likely to moderate due to the high benchmark the new incoming group would have to exceed to help drive another spike in jobs growth.
Secondly, the call is likely some recognition of the recent softening seen in the forward-looking indicators of labour demand, notably job vacancies and employment intentions from private surveys.
