Preview: Labour Force Survey — August

Australia's monthly employment data are due to be released by the ABS at 11:30am (AEST) today. The report will cover the month of August where employment is expected to have moderated following a strong print in July, though no change is anticipated in the unemployment rate. 

As it stands | Labour Force Survey 

In July, the labour market rebounded from weakness in the previous month, as employment increased by a net 41.1k to easily easily surpass the 14k addition expected by markets. This lifted the pace of employment growth over the year from an already robust 2.4% to 2.6%. On a more near-term basis, its pace was unchanged on 3 and 6-month annualised terms at 2.6% and 2.4% respectively.

For the third time in the past 4 months, the workforce participation rate rose to a new record high, increasing on this occasion from 66.0% to 66.1%. The arithmetic was the rise in employment (41.1k) was closely matched by the increase in labour supply (41.9k), which resulted in the unemployment rate printing at 5.2% for the 4th consecutive month. More broadly, spare capacity is the key issue for the nation's policymakers and here the underutilisation rate increased from 13.4% to 13.6% and the underemployment rate was up from 8.2% to 8.4%.   

Driven by the strong increase in employment, aggregate hours worked firmed by 0.5% in July, while the annual pace lifted from 1.5% to 2.0%. However, after adjusting for the increase in employment, average hours worked per employee lifted by just 0.2% in the month to 137.9 hours, which is 0.6% lower than a year earlier.  


Market expectations | Labour Force Survey 

In today's release, the median forecast according to Bloomberg is for employment to rise by 15,000 in August; this is around a wide range of estimates from -14,000 to +32,000. The unemployment rate is expected to hold at 5.2% for the 5th month in a row, with individual forecasts varying from 5.1% to 5.3%, which is despite an anticipated decline in the participation rate from 66.1% to 66.0%.  

What to watch | Labour Force Survey

In the minutes of the Reserve Bank of Australia's September policy meeting that were released earlier this week, the Board's assessment of the labour market was summarised by the following line: "...recent outcomes suggested that spare capacity remained in the labour market and that the Australian economy could sustain lower rates of unemployment and underemployment". This indicates that the Board is close to the lowering the cash rate again, unless it sees some signs of progress in this report that spare capacity is being absorbed, either through a lower unemployment rate (currently 5.2%) or a fall in underemployment (8.4%) and underutilisation (13.6%).