Australia's Labour Force Survey for October is due at 11:30am (AEDT) this morning. The September survey showed signs of softening in the labour market as employment disappointed expectations and hours worked declined; however, the unemployment rate fell to 3.6% as the participation rate eased. In today's report, while a stronger employment outcome of 24.5k is forecast, this is expected to be insufficient to prevent a rise in the unemployment rate to 3.7%.
A recap: Labour market activity showed signs of softening in September
After a 63.3k surge in August, employment slowed to a 6.7k increase in September - well below the expected 20k rise. This was driven by the part-time segment (46.5k) with full-time employment declining (-39.9k), part of a broader rotation that became evident in Q3 as part-time increased by 122.4k and full-time fell by 53.2k.
Despite the modest rise in employment, the unemployment rate declined from 3.7% to 3.6% - with underemployment (6.4%) and underutilisation (9.9%) also falling - as the participation rate eased to 66.7% from a record high in September (67%). This was the first time the participation rate had declined on the prior month since April.
Rounding out what was a soft report, hours worked declined by 0.4% month-on-month and by 0.9% quarter-on-quarter in Q3. All in all, rising employment indicates that labour demand continues to remain resilient to the broader economic slowdown; however, there does appear to be a margin of adjustment playing out through a reduction in hours. This may be driving the rotation to part-time employment, with more people falling below the 35 hours or more per week threshold the ABS considers to be full-time employment.
Stronger employment is expected in October...
Markets anticipate employment will pick up to a 24.5k rise in October, although the band of estimates is very wide ranging from 45k on the high side to -8.7k on the low side. Directionally, the ABS's payrolls series supports the consensus expectation for a stronger employment outcome. The payrolls index lifted by 0.2% for the month through mid-October, with the ABS highlighting the effect of temporary hiring associated with the Voice Referendum. The market expects a shift in the unemployment rate to 3.7%, despite anticipating a better month for employment. This likely reflects an expectation for the participation rate to increase following its decline in September.
... with the composition in focus
Given the recent trends, the composition of employment growth will be closely watched, as will hours worked. These appear to be the areas of the labour market that are adjusting to the slowdown in economic growth. Although a rise is expected in October, 3.7% unemployment would still be a historically low level in Australia.
