[CommSec Research]Employment rebounds, highlighting mixed conditions

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Employment rebounds, highlighting mixed conditions 

Labour market (March 2011)

• Employment rebounded in March, lifting by 37,800 people. Economists had tipped job gains of 20,000 (range from +5,000 to +30,000 jobs). The February result was revised to show job losses of 8,600 people (previously -10,100). Full-time employment rose by 32,100 in March (February jobs were up by 50,400) and part-time jobs rose by 5,700 (February jobs fell by 58,900).The unemployment rate eased from 5.0 per cent to 4.9 per cent. The participation rate rose from 65.7 per cent to 65.8 per cent. The working age population rose by 18,900.
• Jobs jump around from month to month. But over the past four months employment has lifted by 44,100 or just over 11,000 jobs per month - below the growth rate of new entrants. Employment is growing at a more sustainable pace.
• Average hours worked rose by 0.8 per cent in March after lifting by 1.2 per cent in February. 
• NSW has the highest unemployment in the nation at 5.8 per cent. Across the states and territories unemployment rates in March were: NSW 5.8 per cent (4.9 per cent in February); Victoria 4.5 per cent (5.0 per cent); Queensland 5.5 per cent (5.6 per cent); South Australia 5.4 per cent (5.8 per cent); Western Australia 4.2 per cent (4.2 per cent); Tasmania 5.6 per cent (5.6 per cent); Northern Territory 2.4 per cent (2.4 per cent); ACT 3.2 per cent (3.3 per cent).
• Employment rose most in Western Australia (up 12,900) followed by Queensland (up 11,900), South Australia (up 7,400), Victoria (up 6,500), and Northern Territory (up 800), Tasmania (up 700), ACT (up 100). Jobs fell 5,200 in NSW.

What does it all mean?

• You can understand why the Reserve Bank left rates unchanged this week - it is hard to get a clear reading of the economy at present. Consumers aren't spending, home loans are at decade lows and some prices are going up with other going down. Then you have a job market which seemingly is weak one month and indestructible the next. As always the truth lies in between.
• It is clear that the economy has lost momentum. With the job market it is always important to look at trends over time. Over the past four months jobs rose by just over 44,000 or around 11,000 a month. While employment appeared to be going gangbusters in March, over time job creation has slowed to a more sustainable pace.
• It is important to remember that employment is a lagging indicator - it reflects hiring decisions made as much as 5-6 months ago. And that was before the floods and Japanese earthquake. But other indicators like home loans are forward-looking. If people aren't taking out loans, especially for construction, then it suggests that jobs may begin drying up. For the Reserve Bank, the safest place is on the interest rate sidelines.
• CommSec believes that the Reserve Bank would be comfortable with interest rate settings given the soft spending and housing market conditions and slowdown in job creation. Rates are on hold for at least the next three months until the Reserve Bank gets more clarity on the economy.
• Certainly builders and retailers will be happy with today's employment result. The job market is still healthy with employment still rising in trend terms. The main challenge is to get consumers confident and spending again - but given all the natural disasters of late, that will take time.
• Western Australia, ACT and Northern Territory have unemployment well below 5 per cent and aren't generating super-normal wage increases. So we need to rethink where "full employment" lies. But there should be no complacency in the Government. The aim is to increase the supply of labour - through training, incentives to move from high unemployment to low unemployment areas and immigration.