Unemployment rebounds, rising back to 5.3%. Employment, +13.5k.

Detail

  • In January: employment rose, but at a sub-par pace; unemployment rebounded; hours worked fell
  • Employment: +13.5k, meeting our expectations (+15k) but above market (+10k)
  • Unemployment: rose from 5.1% to 5.3%, an upside surprise (market and Westpac 5.2%)
  • Participation rate: jumped to 66.09%, from 65.99%

Additional detail

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  • Employment was, this month, concentrated in full-time, +46k. Part-time fell, -33k, reversing a +31k last month.
  • Despite this, of late strength has been in part-time, +2.6yr vs +1.6%yr for full-time.
  • By state, the +13.5k gain was spread across WA, +7 (reversing a -6), and Vic and Qld, both +3.
  • Hours worked: -0.4% following a +0.5%.
  • Underemployment: rose further, from 8.3% to 8.6%.

Comments

The January labour force survey in detail and tone was broadly in keeping with our reading of the economy and calls into question the RBA’s optimism.

On unemployment, the surprise dip in November and December from 5.3% to 5.1% has been fully reversed. Considerable labour market slack remains, with underemployment rising to 8.6%. Wages growth is set to remain weak and inconsistent with an economy on a sustainable expansion path.

Employment momentum has slowed, considerably so, and is running below population growth. This is broadly consistent with the overall economic backdrop – growth well below trend and arguably stuck around a 2% pace.

Over the past four months, job gains averaged 14.2k a month, in line with the 3 month average to December of +14.4k. This is a 1.25% annualised pace, a clear notch below working age population of 1.64%. Recent outcomes are well below the 2.5% annualised pace prevailing in mid-2019.

Labour supply strength remains a key theme, with the participation rate jumping in January to be back towards the record high recorded last August. The small downward movement late in 2019 was likely only temporary. There is a clear and strong upward trend in female participation.

On the bushfires, the ABS notes that there was some modest disruption to the operation of the survey. It appears, as we anticipated, that this impacted hours worked more so than numbers employed.

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