Australia's jobs report: What it means according to economists

jobs in Australia — A job advert for a local fast food outlet hangs on a wall in a shopping center located in central Sydney, Australia, in this March. Reuters/David Gray

Australia’s job report in May has exceeded expectations with a huge increase in employment. The fastest growth of employment was seen over the past three months, with numbers rising by 141,100.

So far, this year's employment growth is averaging 30,700 monthly with the vast majority of employees working full-time. Total hours worked increased by 31.1 million hours, a 1.87 percent rise in the previous month.

Surprisingly, labour market conditions have improved. Participation soared 64.9 percent, its best level in 10 months.

As hiring levels surge, unemployment rate in Australia stumbles to a more than four-year low. Also, the booming employment leads more people to enter the labour market.

What economists say

JP Morgan economist Tom Kennedy admitted a disappointment in the past year, but since the start of 2017, full-time work has kicked up a gear in 1H17. He added that positive strong employment print resulted to decent work hours.

However, despite the growth of full-time jobs, Kennedy stressed the underemployment rate is still elevated. “We still characterize today’s print as consistent with the view that the RBA has more work to do, though easing may take longer to eventuate than initially anticipated given the chronic, rather than acute, nature of the weakness,” Business Insider Australia quotes him as saying.

Commonwealth Bank’s Kristina Clifton highlighted the accelerating pace of employment growth. Over the past three months, jobs growth averaged 47,000 monthly, she noted, adding the figure was more than what was needed to accommodate the growing population.

AMP Capital's Head of Investment Strategy and Chief Economist Shane Oliver also shared how he interpreted Australia’s most recent jobs report, saying the figures could reflect sample rotation issues. He also noted that underemployment is still high at 8.8 percent, though he never failed to acknowledge a strong job growth.

Tapas Strickland, an economist within Global Markets Research at the National Australia Bank (NAB), said the strong numbers vindicate the market. “Leading indicators point to further improvement in the months ahead,” he said.

ANZ’s David Gradwell said the strong result that the labour market posted in May had built on positive outcomes in the two earlier months. He noted that employment is currently 2 percent higher than in 2016 and has started to catch up to other indicators such as profitability, capacity utilisation, business conditions and job advertisements. All these, Gradwell said, are now feeding through to actual job creation.

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