Australia: Statistical correction before employment accelerates through Q3? - Westpac

Australia’s leading indicators continue to point to accelerating employment growth but analysts at Westpac are looking for a statistical correction in May, explains Justin Smirk, Research Analyst at Westpac.

Key Quotes

“Total employment increased by 37.4k in April, well above expectations (market median and Westpac +5k). The two month jobs gain was 97.4k. Of course the employment spike in April, which was a 5.0% annualised pace, exaggerates the underlying momentum in the labour market. Over the past year, employment grew by 1.6%, more in line with population growth.”

“Full-time fell by 11.6k in April, but that comes after a jump of 73.9k in March. Full-time employment is 1.0% higher over the past year but it is still underperforming compared to the 3.0%yr pace for part-time employment.”

“The participation rate was steady at 64.8% in April, after rebounding over recent months, which resulted in a modest 18.3k gain in the labour force. This was somewhat surprising given the strength of the gain in total employment. As the gain in employment was greater than the gain in the labour force the unemployment rate printed at 5.71%, a moderation from 5.86% in March.”

“Given that survey volatility is part of the reason for our negative forecast for May we are also forecasting the participation rate to ease back to 64.7 from 64.8 resulting in a modest 5k decline in the labour force. This decline in the labour force should be enough to hold the unemployment rate flat at 5.7%.”

“Westpac’s Jobs Index continues to point to near-term upside momentum suggesting the annual pace should currently be around 2%yr before accelerating to 2½%yr by year’s end.”

“We will also get an update on the ABS’s quarterly estimate of employees’ unemployment expectations – or as the ABS reports “Employees expected to lose their jobs due to employer or own business closing down”. This measure of unemployment expectations hit a cycle low in the 2016 Q3and has been drifting higher since.”