Labour Force Survey — December | By the numbers
- Employment (on net) increased by 28.9k in seasonally adjusted terms in December to outperform the consensus forecast for a rise of 10.0k. November's initially reported 39.9k gain was trimmed to 38.5k.
- The national unemployment rate fell from 5.2% to 5.1%, where the market had expected it to remain at 5.2%, and is now at its lowest since March 2019.
- Underutilisation eased from 13.5% to 13.4% to a 6-month low, though underemployment was unchanged at 8.3%.
- The workforce participation rate held steady at 66.0%, as expected.
- Aggregate hours worked posted a 0.5% rise in December to 1.79bn hours (prior +0.2%), with the annual pace increasing from 1.7% to 2.3% driven by a base effect.
Labour Force Survey — December | The details
For the second consecutive month, employment surprised to the upside of expectations rising by 28.9k in December (expected 10.0k) following November's gain of 38.5k. With the labour force rising by 16.0k in the month, the total of unemployed declined by 12.9k, which resulted in the unemployment rate falling from 5.17% to 5.07% to be at its lowest level in 9 months.
Breaking December's employment outcome down, the 28.9k rise came entirely from the part-time segment (29.2k) as full-time declined slightly (-0.3k). For the year as a whole, employment increased by 262.5k, with the pace lifting a touch from 2.0% in November to 2.1%. In 2019, full-time led (152.7k), though the pace slowed notably over the last few months of the year to 1.8%. However, some moderation came through from part-time employment, which lifted by 109.0k in 2019 (2.7%yr) and was concentrated over the second half of the year (92.8k).
Highlighting the slowdown that occurred towards the end of the year, employment growth was 43.4k (full-time -8.0k and part-time 51.5k) in Q4 and was well down from the previous quarters; 81.4k in Q3, 73.9k in Q2 and 63.9k in Q1.
At the same time, the quarterly profile for unemployment improved gently towards the end of 2019; 5.1% in Q1, 5.3% in Q2, 5.2% in Q3 and 5.1% in Q4, which occurred as the rise in participation unsurprisingly slowed after running up to record-high levels.
While part-time work accounted for all of the increase in employment in December, total hours worked posted their strongest monthly rise (0.5%) since last July. In annual terms, the pace accelerated from 1.7% to 2.3% to its fastest since March 2019, though this is likely overstated by a base effect as a -0.1% fall from December 2018 fell out of the calculation. Adjusting for the rise in employment, average hours worked per employee lifted from 137.6 hours to 138.0 hours in December to maintain its gradual uptrend from recent months.
Turning to the state detail, unemployment rates fell for most states in December; New South Wales -0.1ppt to 4.5%, Queensland -0.6ppt to 5.7%, South Australia -0.1ppt to 6.2%, Western Australia -0.3ppt to 5.4% and Tasmania -0.5ppt to 5.5%. Victoria went against the trend, rising from 4.6% to 4.9%.
The next chart shows employment growth in December was driven by New South Wales (+20.6k) and Victoria (+10.3k), with Tasmania rising modestly (+1.5k). However, declines came in Queensland (-3.6k), South Australia (-3.0k) and Western Australia (-5.3k). For Q4, strength in employment was concentrated in Victoria (26.6k), while New South Wales was next highest at 7.6k. Together, New South Wales (95.0k) and Victoria (90.3k) accounted for around 71% of national employment growth in 2019.
Labour Force Survey — December | Insights
Markets responded to the stronger-than-expected detail in today's report by scaling back pricing for a February RBA rate cut from around 60% pre-release to around 30%, assessing that the near-term risks for further easing have reduced notably. However, next week's CPI report for Q4 remains crucial in deliberations. As far as today's details go, the outperformance in employment when taken with the upside surprise in November's report paints a constructive picture, and while employment growth is still relatively robust (2.1%yr) it clearly slowed over the second half of 2019. The RBA will be encouraged by a gradual downtrend emerging in the unemployment rate but it remains some way above its estimate of full employment at around 4.5% and spare capacity more broadly is still elevated.
