22 November 2019
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A good set of numbers

Craig James
15 November 2018

Employment rose by 32,800 in October, after a revised 7,800 increase in jobs in September (previously reported as a 5,600 increase in jobs). Full-time jobs rose by 42,300 but part-time jobs fell by 9,500. Economists had tipped an increase in total jobs of around 20,000. Hours worked rose by 0.3% in October and lifted by 2.1% over the year. Trend hours worked rose by 0.2% in October and lifted by 2% over the year. The unemployment rate was steady at a 6-year low of 5% in October. In trend terms, the jobless rate fell from 5.2% to 5.1%. In original terms, the jobless rate in October was 4.78% – the lowest rate in almost eight years (December 2010). 

Unemployment across states in October

1. NSW 4.4% (September 4.4%)

2. Victoria 4.5% (4.6%)

3. Queensland 6.3% (6%)

4. South Australia 5.4% (5.5%)

5. Western Australia 5.7% (6%)

6. Tasmania 5.3% (5.7%)

7. Northern Territory 4.6% (4.3%)

8. ACT 3.7% (3.7%).

How does this information affect investors?

Many companies are affected by the employment data but especially those dependent on consumer spending. Among stocks affected are Fairfax, West Australian Newspapers, Seek Limited, McMillan Shakespeare and Skilled Group.

What does it all mean?

More people looking for jobs, more people finding jobs, more hours worked and a jobless rate at 6-year lows. What’s not to like?

The employment market clearly remains firm. And that is clearly great news for consumer-focused businesses. It is not just the fact that jobs are growing and wage growth is lifting, it is also the fact that people are more secure in their jobs. And add in the fact that consumer confidence is above longer-term averages. All these factors will support household spending. It is worth noting that household spending is growing at the fastest pace in six years.  

Leading indicators such as job advertisements, skilled job vacancies and the NAB business survey point to further job gains and further tightening of the job market. Wage growth is lifting, but price inflation is still contained. But the process of “normalisation” of wages, prices and interest rates remains gradual, suggesting that interest rate settings will remain unchanged over at least the next 3-6 months.

At present however, the Reserve Bank will be happy to leave rate settings unchanged. But the extent of the tightening of the job market makes it hard to believe that the RBA will stay on the interest rate sidelines until 2021 as some analysts currently expect.

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