At the end of a week when interest rates dominated the debate about the economy, the NAB’s business survey picked up on what it called a "significant" fall in business conditions in October and the Westpac consumer sentiment survey fell, the October jobs report has again painted a very different picture.
Forget the rise in the unemployment rate to 5.4%, that’s a bit misleading, especially some of the early headlines. In fact the real story is that the jobs boom continues.
The report from the Australian Bureau of Statistics showing the rise of 0.2% was bullish because there was a sharp rise in the number of people looking for work, as well as a larger than forecast rise in jobs created.
Economists had predicted the rate would drop to 5%, with the creation of 20,000 new jobs.
While the economy did add jobs for the month – a net 29,700 positions – the gain came from a jump in part-time employees, with 43,800 such positions added. About 14,100 full-time jobs were lost for the month, the worst result in 14 months.
But the participation rate – the number of people either working or looking for work – came in at 65.9% the highest on record according to the ABS.
That’s a sign of growing confidence in the recovery and the jobs market.
Discouraged people do not look for work and drop out, as they are doing in the US by the hundreds of thousands a month.
In fact America’s current unemployment rate of 9.6% would be closer to 10.4% if all those who have stopped looking for work since mid year, suddenly moved back into the pool of unemployed and started job hunting again.
And, another indication of strength in the labour market, the aggregate hours worked in the month rose by 7.9 million hours, or 0.5%, to 1,602.6 million hours, according to the ABS.
In September there was both a rise in jobs and a rise in full time employment, but a fall in hours worked.
And this is where the report is bullish and will be noted by the Reserve Bank.
It has noted on numerous occasions how our participation rate seems to be stuck around the 65%- 65.4% level, which seems to have been a structural problem in the labour market.
But the sharp rise in the participation rate, which came from a rise in female participation, and a small improvement in the male rate, and mostly all in Queensland, will please the central bank when looking at labour market pressures and wages.
If the participation rate rises any further over the next few months, it could signal that the underlying strength of the economy is much sounder in the minds of the unemployed, or people not looking for work, so they are being attracted back into the labour market.
Total employment rose by 29,700 to 11.356 million in the month, seasonally adjusted. Full-time employment fell by 14,100 to 7.971 million in October and part-time employment was up by 43,800 to 3.385 million.
Finally the labour market is what’s called a "lagging’ indicator in that jobs are usually lost after orders starting falling, exports drop away, inventories rise and hours start being trimmed.
This is a report of a mature labour market book where increasingly confident drop outs are coming back to looking for employment.
If, as the NAB reported this week, business conditions fell away in October, we might see the jobs impact of that until December or January.
What is also interesting is that while retailing has been weak for months, food service, (cafes, takeaways, coffee bars, etc) has been very, very strong, the best performing part of retailing.
Is this what drove the jump in part time employment, which did coincide with the end of the final year of high school and the starting of exams in October (and the ending of some university and Tafe years)?
