Australia: Labour market consolidates solid trend - Westpac

Justin Smirk, Research Analyst at Westpac, points out that May, June & July provided solid updates from the Labour Force survey and this recovery in employment was something that Westpac Jobs Index has been pointing to for some time and our employment forecasts for the next few months incorporated this on-going strength which we expect to continue at least into Q4. 

Key Quotes

“The Jobs Index is composite of business surveys employment indicators and is currently pointing to jobs growth of around 2%yr before accelerating to 2½%yr by around November this year.” 

“In July, total employment rose 27.9k for a 87.5k total gain over the last three months or an average of 29.2k per month. The annual pace of employment growth has lifted from 0.9%yr in February to 2.0%yr in May and it held that pace through June and July. But it is worth noting that six month annualised pace was 3.3%yr in July, a solid bump up from 2.8%yr in June and the fastest pace since January 2011.”

“The Australian labour market went through a soft patch in 2016 that was particularly pronounced through August to November when the average gain in employment per month was just 2.2k. We have clearly bounced out of this soft patch with the labour market now holding a firmer trend with an average monthly growth of 33k for the last six months.”

“A solid update on the labour market

All up this was positive update on the labour market following the robust trend sent by the leading indicators. We still expect the monthly numbers to be quite volatile month to month but our Jobs is pointing to total employment growth potentially hitting 2½%yr by year’s end. This estimate is now looking far more plausible.

We are, however, looking for employment growth to slow as we move into 2017 on the back of a correction to dwelling construction activity, on-going soft household consumption and an underwhelming lift in private investment.”