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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Thursday, 12 March 2015

Jobs report so-so

Employment report middling

The ABS released its Labour Force figures for February 2015 and they were passable, but no better than that.

The reported unemployment rate dipped back to 6.3 percent after last month's spike which just might persuade the Reserve Bank to keep interest rates on hold for another month, allowing the Board to take into account the next round of inflation data on 22 April.

Let's take a look in 3 short parts.

1 - Employment up moderately

Total employment was reported as having increased by +15,600 to a new high of 11,652,400 on a seasonally adjusted basis - this series now falling back into line after some questionable gyrations - and on a trend basis employment increased +14,000 to 11,654,000.

Aggregate hours worked increased by 0.6 percent. However, the participation rate ticked back to 64.6 percent.

Zooming in the chart to a 5 year time horizon shows how the trend figures have been the more reliable measure of late.

What the gradient of the chart does show is that while employment is rising, it is still not doing so at a sprightly enough pace given the expansion of the total labour force.

The job gains reported for the month of February were split between full time (+10,300) and part time (+5,300).

Overall, not a bad "month" of figures, but in the context of the past year an increase in total employment of around 150,000 is still well behind the desired rate.

Economist Saul Eslake noted that given the rate of population growth in Australia the economy needs to be adding around 20,000 jobs per month to keep the unemployment rate from rising.

Part 2 - State versus state

There have been some oddball numbers reported for New South Wales over the past two months,which will likely smooth themselves out over time, but the clear winner for employment growth over the past year has been Victoria (+88,000).

A horrible result was reported for South Australia in February (-7,200), and while one should not become too transfixed with the figures for any given month, the employment market in South Australia appears to be very poor.

Looking at total employment cumulatively over recent years shows that Western Australia has, to date least, defied the gloomiest of the gloomers by continuing to add jobs on a net basis, although the unemployment rate has clearly been trending up.

Queensland is now dramatically a two-speed employment market with some mining regions seemingly in dire straits at the present time, although employment markets have remained relatively robust in most (though not all) of Greater Brisbane.

The "Most Improved Award" for state labour markets, were there to be such a thing, would probably be presented to Tassie, with the Apple Isle appearing to be enjoying the depreciation of the currency.

South Australia's total employment, however, has been going backwards for more than half a decade.

The number of reported unemployed persons on a trend basis in South Australia has increased by more than 35 percent since the beginning of 2012 and South Australia also now has the highest rate of unemployment in the country.

The unemployment rates reported in the Q3 2014 Small Area Labour Markets release suggest that high levels of unemployment have become a serious issue in the Elizabeth/Smithfield-Elizabeth North/Davoren Park areas, now recording by a significant margin the highest capital city unemployment rates in the country.

With the long drawn out retreat of car manufacturing appearing set to drag on for some time yet, this problem appears likely to become worse before it gets better.

Part 3 - Unemployment

The trend unemployment rate in February 2015 was reported at 6.3 percent, while the seasonally adjusted unemployment rate dipped back to 6.3 percent after a significant spike in January.

The ABS state level unemployment figures are extremely unreliable on a month to month basis, but once again Tassie appears to be deserving of the "most improved" award. 

At the state level, a contraction in mining investment is beginning to drive the rates of unemployment higher in parts of Western Australia, Queensland and to a lesser extent New South Wales.

The figures here are presented on a smoothed 4mMA basis, and even then they still jag around a bit, but the general trend is up.

Perhaps the most important story buried within today's release concerns underutilisation, underemployment and elevated levels of youth unemployment.

For more intelligent analysis and charting of these key metrics I recommend following David Scutt of Scutt Partners on his Twitter handle @David_Scutt

Next week my analysis of the Detailed Labour Force figures for February 2015 will reveal how unemployment is rising dramatically in many parts of regional Australia

The Wrap

Nothing particularly spectacular or shocking jumped out of today's report from the headline figures - at least, not to me, although I haven't yet read too widely how the release has been interpreted elsewhere.

It will be interesting to see what move the Reserve Bank takes next.

Inaction seems to be the preferred modus operandi where possible, yet with iron ore prices tumbling to new 6 year lows almost by the day, inflation not appearing too threatening, economic growth forecast to remain below trend and the unemployment rate still expected to rise, there seem to be plenty of reasons to expect another cut.

Cash rate futures markets at the close yesterday were split down the middle on the April Monetary Policy decision, but were pricing another cut by May to a cash rate of 2 percent as close to a certainty.