Preview: Labour Force Survey — October

Australia's monthly update on the labour market is due to be released by the ABS at 11:30am (AEDT) for October. Markets expect employment to rise modestly in the month by 16.0k and for the unemployment rate to remain at 5.2%. 

As it stands | Labour Force Survey 

Employment increased by a net 14.7k in September; broadly matching the consensus expectation of 15.0k to round out a robust quarter. In fact, employment on net increased by 87.6k in Q3 making it the strongest quarter since Q4 2017. Employment growth in annual terms remained at around a 2.5% pace, though a jump in the 3-month annualised pace from 2.3% to 2.7% suggests the momentum has strengthened recently.

The workforce participation rate remains around its highest level on record despite easing slightly from 66.2% to 66.1% in September. This equated to the workforce increasing by a modest 6.6k and as this was outpaced by the 14.7k lift in employment, the unemployment rate declined from 5.3% to 5.2%. Additionally, the underutilisation rate fell from 13.8% to 13.5% and the underemployment rate declined from 8.5% to 8.3% to more than overturn their increases from the previous month. Notwithstanding, the level of spare capacity in the labour market remains highly elevated and is consistent with yesterday's subdued update of the Wage Price Index for Q3 (see here).    

Growth in aggregate hours worked lifted by 0.2% in September to match August's outcome, though the annual pace eased from 2.0% to 1.9%. Average hours worked per employee ticked up by 0.1% in the month to 138.1 hours but was down by 0.5% on the level from a year earlier. 

For a full review of September's report see here

Market expectations | Labour Force Survey 

According to Bloomberg's survey of economists, the consensus expectation is that employment increased by 16.0k in October, with individual estimates varying between 7.0k and 30.0k. Meanwhile, the unemployment rate is anticipated to have remained at 5.2%, with the range of estimates tight between 5.2% and 5.3%. Lastly, no change in the participation rate from 66.1% is the consensus expectation between a range from 66.1% to 66.2%. 

What to watch | Labour Force Survey

The key question is whether the unemployment rate, as well as the broader measures of underemployment and underutilisation, can hold on to (or potentially even improve on) their gains from the previous month in today's report. As is always the case, much will depend on what happens with the participation rate, with the decline in September from 66.2% to 66.1% coming against the run of play given this was its first monthly fall since February earlier this year. The outgoing rotation group in the ABS's sample has a lower participation rate than the sample as a whole, so there could potentially be some upside risk attached to the market's expectation for the participation rate to hold at 66.1%.