"Very solid" November jobs report outperforms expectations

Summary: Total employment jumps by 366,200 in November; rise larger than 200,000 expected; “very solid update”, “jobs market significantly outperforming all expectations”; participation rate rises by 1.5ppt to 66.1%; fewer jobseekers, larger workforce sends jobless rate to 4.6%; more part-time, full-time jobs; aggregate work hours up 4.5%; underemployment rate down from 9.5% to 7.5%.

Australia’s period of falling unemployment came to an end in early 2019 when the jobless rate hit a low of 4.9%. It then averaged around 5.2% through to March 2020, bouncing around in a range from 5.1% to 5.3%. Leading indicators such as ANZ’s Job Ads survey and NAB’s capacity utilisation estimate suggested the unemployment rate would rise in the June 2020 quarter and it did so, sharply. The jobless rate peaked in July 2020 but fell below 7% a month later. It then trended lower through the remainder of 2020 and into 2021.

The latest Labour force figures have now been released and they indicate the number of people employed in Australia according to ABS definitions jumped by 366,200 in November. The rise was much greater than the expected 200,000 increase and in contrast to October’s revised fall of 56,000.

“There is no doubt this is a very solid update highlighting a labour market significantly outperforming all expectations,” said Westpac senior economist Justin Smirk. He noted “total employment is now higher than it was back in June 2021…”

“While we were expecting a sharp rebound, this snapback far exceeded our expectations and adds upside risk to our already very positive outlook,” said ANZ senior economist Catherine Birch.

Short-term domestic Treasury bond yields increased noticeably on the day while longer-term yields hardly reacted. By the close of business, the 3-year ACGB yield had gained 7bps to 1.26%, the 10-year yield had crept up 1bp to 1.63% while the 20-year yield finished 1bp lower at 2.17%.

In the cash futures market, expectations of any material change in the actual cash rate, currently at 0.04%, remained fairly soft. At the end of the day, contract prices implied the cash rate would not exceed the RBA’s 0.10% target rate until April 2022 but then rise to 0.90% by December 2022 and to 1.10% by March 2023.

The participation rate increased from October’s revised rate of 64.6% to 66.1%, as the total available workforce increased by 322,000 to 13.814 million. The number of unemployed persons fell by 69,300 to 636,700; the lower jobless number in conjunction with the greater number of people in the workforce led to a fall in the unemployment rate from 5.2% to 4.6%.

The aggregate number of work hours across the whole Australian economy rose as 237,800 residents gained part-time positions and 128,300 residents gained full-time positions. In percentage terms, the total number of work hours increased by 4.5% after declining by 0.2% in October. On a 12-month basis and after revisions, aggregate hours worked rose by 4.5% as 9,100 more people held part-time positions and 339,400 more people held full-time positions than in November 2020.

In recent years, more attention has been paid to the underemployment rate, which is the number of people in work but who wish to work more hours than they do currently. Unsurprisingly, the underemployment rate fell in October. However, the drop over one month from 9.5% to 7.5% was unusually large.

The underutilisation rate, that is the sum of the underemployment rate and the unemployment rate, has a strong correlation with the annual growth rate of the ABS private sector wage index when advanced by one quarter. November’s underutilisation rate of 12.1% corresponds with an annual growth rate of about 3.4%.


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