The ASX rose and the Aussie dollar fell on Thursday just after 11.30am when the labour force data for December and 2022 was released by the Australian Bureau of Statistics (ABS).
The different reactions to the same figures were intriguing and suggest that there remains a fair bit of confusion in the markets about the direction of the economy and other indicators as has been the case for quite a while.
The stockmarket reaction seems to be a feeling that the RBA might not be so keen to continue lifting rates at its meeting next month, the dollar’s dip could be an indication that view is supported and therefore the prospect of fewer or smaller rate rises means the dollar should be weaker.
In fact, it was probably a case of both fears at work – the ASX has not been hurt by the Reserve Bank’s successive rate rises since they started in May and yet the Aussie dollar is around 3% lower including yesterday’s dip back under 69 US cents.
Certainly the December labour force figures contained enough oddities to trigger a confused reaction – a hint or two of weakness but the underlying reality was confirmation the jobs market remains very right with another strong month of full time employment growth – that was something many in the markets skated over.
The ABS said the seasonally adjusted unemployment rate remained at 3.5% in December, in line with the November reading as employment fell by around 15,000. There was a 5,800 rise in the number of people out of work and the participation rate eased back from the record level in November as more people than expected dropped out because of sickness or holidays.
Sharemarket investors and some others thought ‘good news: small or perhaps no rate rise’ from the Reserve Bank at its first meeting for 2023 on February 7, while those in currency markets said, ‘we don’t know because other parts of the report suggest the labour market remains as strong as it has been.’
And what were those parts? Well, while seasonally adjusted employment fell 15,000 people (0.1%) in December it was after the very strong increase of 58,000 people in November (down from 64,000 first reported last month).
And the data shows that full-time employment rose by 17,600 to 9,619,000 people, while part-time employment fell by 32,200 to 4,128,100 people. That looks like a lot of part time workers became full time employees in December – that’s a sign of a very strong jobs market.
Economists say that the boost in full time work in December was almost certainly sourced from part time workers at places of employment, while the fall in part time work could also reflect high Covid levels and the end of school year and casual employment ahead of the summer holiday break.
On top of that the ABS again pointed out that the number of people working reduced hours in December because of illness was again high – rising by 86,000 to 606,000, “which is over 50% higher than we would usually see at this time of the year,” Lauren Ford, head of labour statistics at the ABS pointed out in a statement with the data.
The rise in people off ill probably accounted for the fall in the seasonally adjusted participation rate (down 0.2 percentage points to 66.6% in December which was back to around where it was in October.
“Despite this slight fall from its historic high, it finished the year 0.8 percentage points higher than its pre-pandemic level,” Ms Ford said.
The employment to population ratio also decreased, down 0.2 percentage points to 64.3 per cent. In historic terms, it continued to remain elevated, 1.9 percentage points above the pre-pandemic level.
Seasonally adjusted monthly hours worked decreased by 0.5% for the second consecutive month, following the peak in October. That seems due to higher-than-normal numbers of people not working because of illness (read Covid).
“The falls in employment and hours worked in December followed strong growth through 2022, with an annual employment growth rate of 3.4 per cent and hours worked increasing by 3.2 per cent.
“The strong employment growth through 2022, along with high participation and low unemployment, continues to reflect a tight labour market,” Ms Ford said.
Seasonally adjusted 452,000 people got jobs across Australia last year while there was a fall of 99,000 in the number of people unemployed.
The biggest influence on the labour market is the continuing low levels of immigration. As that slowly rises as forecast this year, jobs growth might slow. But with around 440,000 jobs vacant in November and nearly 500,000 unemployed, there’s still a lot os scope for the empty positions to be filled – if they remain open as economic activity slows.
