Labour Force Survey — January | By the numbers
- Employment on net increased by 13.5k (seasonally adjusted) in January, beating the consensus estimate (+10.0k) for the third straight month. December's initially reported 28.9k increase was revised to 28.7k.
- Australia's unemployment rate lifted by more than expected rising from 5.1% to 5.3%, where consensus had been for a more gradual uptick to 5.2%.
- Underutilisation rate increased from 13.4% to 13.9% and the underemployment rate lifted by 0.3ppt to 8.6%, with both measures rising to their highest since June 2018.
- Workforce participation rate edged up unexpectedly by 0.1ppt to 66.1% (expected: 66.0%), just below its record high of 66.2%.
- Aggregate hours worked declined by 0.4% in January — its weakest monthly outturn since May 2018 — as the annual pace pulled back from 2.2% to 0.9%.
Starting on a positive note, January's employment outcome of 13.5k was stronger than the 10.0k rise anticipated by markets and followed the outperformance recorded in November (37.1k) and December (28.7k). The last time employment came in ahead of consensus for three straight months was between March and May 2019. The downside was that employment in January was not nearly strong enough to meet the number of new entrants into the labor force (44.6k) as the participation rate lifted from 65.99% to 66.09%. As a result, the total of unemployed increased by 31.0k, which equated to the unemployment rate rising by its most (0.21ppt) in a single month in 3 years from 5.08% to 5.29%, unwinding the declines recorded in November and December.
Arguably, of more concern to the Reserve Bank of Australia will be the rise in spare capacity. The underemployment rate (counting workers who want and are available to work more hours) increased from 8.3% to 8.6%, and the underutilisation rate (combining the unemployed and underemployed) escalated from 13.4% to 13.9%. An elevated level of spare capcity continues to restrain the pace of wages growth in Australia, as highlighted in yesterday's WPI data for Q4 (see here).
Breaking January's employment outcome down, the 13.5k increase was the net result of full-time employment rebounding from several weak months rising by 46.2k, while the part-time segment declined by 32.7k after showing strength in the preceding two months. In annual terms, the pace of employment growth eased from 2.06% to 1.94%. Annual growth in the full-time segment softened from 1.76% to 1.65% and part-time moderated from 2.72% to 2.58%.
Aggregate hours worked were notably weaker in January falling by 0.4%, though the ABS's analysis had found no significant bushfire-related impact, while annual growth was lowered from 2.2% to a soft 0.9%. On an average basis, hours worked per employee declined by 0.6% to 137.1 hours in January to be down by 1.0% from a year earlier.
Looking across the states, employment outcomes were generally subdued in the month; New South Wales -1.5k, Victoria +2.9k, Queensland +2.8k, Western Australia +6.7k, South Australia +1.0k and Tasmania +0.3k. In terms of unemployment rates, South Australia was the only state to record a decline this month falling from 6.2% to 5.7%. New South Wales' unemployment rate was maintained at 4.5%, but there were increases for all other states; Victoria from 4.9% to 5.4%, Queensland from 5.7% to 6.3%, Western Australia from 5.4% to 5.8% and Tasmania from 5.5% to 5.9%.
Labour Force Survey — January | Insights
Employment growth softened over the second half of 2019, though the year did finish on a somewhat positive tone after the strong outcomes in November (37.1k) and December (28.7k). Today's result was much more modest at 13.5k, but taking into account the strength towards the end of 2019, the 3-month average has lifted to 26.4k off lows of around 9.0k between October and November. The surprise in today's report was the sharp rise in unemployment and spare capacity more broadly, even allowing for the increase in participation. The Reserve Bank of Australia has made it clear that further easing will be dependent on a deterioration in labour market conditions, and while today's report in isolation probably does meet meet that qualification yet, the warning signs are there.
