Craig JamesDecember 7, 2020
GUEST OBSERVER
Employment rose by 17,900 in May after rising by just 900 people in April (previously reported as a rise in jobs of 10,800). Full-time jobs were unchanged while part-time jobs rose by 17,900. Economists had tipped a 15,000 increase in jobs.
Hours worked rose by 1.7 per cent in May – best gain 16 months. Hours worked are up by 1.4 per cent on the year.
Jobless rate: The unemployment rate held steady near a 3-year low of 5.7 per cent in May (lowest since September 2013). The trend unemployment rate was steady at a 31-month low of 5.7 per cent. The participation rate was steady at 64.8 per cent.
Unemployment across states in May: NSW 5.2 per cent (April 5.3 per cent); Victoria 5.8 per cent (5.6 per cent); Queensland 6.4 per cent (6.5 per cent); South Australia 6.9 per cent (6.8 per cent); Western Australia 5.7 per cent (5.6 per cent); Tasmania 6.5 per cent (6.3 per cent). In trend terms unemployment in the Northern Territory fell from 4.2 per cent to 4.1 per cent; ACT unemployment fell from 3.9 per cent to 3.8 per cent.
Domestic air traffic: In the year to April, 58.1 million passengers were carried on domestic air routes, up 1.4 per cent over the year and the strongest growth in 25 months.
A raft of companies is affected by the employment data but especially those dependent on consumer spending. Amongst stocks affected are Fairfax, West Australian Newspapers, Seek Limited, McMillan Shakespeare and Skilled Group.
What does it all mean?
There is no pleasing some people. The economy is growing at a 3.1 per cent annual pace – best for 31⁄2 years – and people don’t believe it. Similarly, the jobless rate remains at a near 3-year low of 5.7 per cent and people don’t believe it. Still, trend data shows that the unemployment rate has been consistently improving over the past year and stands at 5.7 per cent, in line with the
seasonally adjusted result. So it is no fluke – economic growth has picked up, and the jobless rate has come down.
While job creation is concentrated in part-time positions, this is to be expected with an election underway. Businesses want to see the election outcome before they commit to taking on more workers. And encouragingly the number of hours worked posted the strongest gain in 16 months suggesting that the work is there. Businesses are just meeting the extra demand by hiring temps and getting existing employees to work more hours.
So no surprises in the jobs data. And that suggests the Reserve Bank will stay on the interest rate sidelines until August at which point it will have digested the latest inflation data.
Arguably the NSW, ACT and Northern Territory job markets are at or near “full employment”. The $64 question is at what point wage pressures emerge, potentially injecting some inflation into the economy. If wage pressures emerge, they are more likely to emerge in construction markets.
Employment by industry jobs data is released next Thursday.
The lift in the number of passengers flying domestic air routes – especially the key Sydney-Melbourne route – adds further weight to the argument that the economy is doing well. The lift in the growth rate of passengers on the Sydney-Melbourne route (third busiest in the world) lines up with the improvement in the job market over the past year.
What do the figures show?
Labour force:
Employment rose by 17,900 in May after rising by just 900 people in April (previously reported as a rise in jobs of 10,800). Full-time jobs were unchanged while part-time jobs rose by 17,900. Economists had tipped a 15,000 increase in jobs.
Hours worked rose by 1.7 per cent in May – best gain 16 months. Hours worked are up by 1.4 per cent on the year.
The unemployment rate held steady near a 3-year low of 5.7 per cent in May (lowest since September 2013). The trend unemployment rate was steady at a 31-month low of 5.7 per cent.
In trend terms the jobless rate for 15-24 year persons was steady at 12.2 per cent.
The underemployment rate was steady at 8.4 per cent in May. The underutilisation rate rose from 14.1 percent to 14.2 per cent.
The participation rate was steady at 64.8 per cent.
A total of 224,700 jobs were added over the year to May. The annual growth rate eased from 2.0 per cent to 1.9 per cent. In trend terms, employment has risen for 30 consecutive months although the jobs growth of 3,700 in May was the weakest in 20 months.
The working age population rose by 21,700 in May. The working age population rose by 287,900 over the past year – the strongest gain in two years. The working age population is up 1.5 per cent over the past year – strongest growth in 17 months.
Unemployment across states in May: NSW 5.2 per cent (April 5.3 per cent); Victoria 5.8 per cent (5.6 per cent); Queensland 6.4 per cent (6.5 per cent); South Australia 6.9 per cent (6.8 per cent); Western Australia 5.7 per cent (5.6 per cent); Tasmania 6.5 per cent (6.3 per cent). In trend terms unemployment in the Northern Territory fell from 4.2 per cent to 4.1 per cent; ACT unemployment fell from 3.9 per cent to 3.8 per cent.
Jobs across states and territories in May: NSW +5,200; Victoria +1,100; Queensland -4,200; South Australia - 3,700; Western Australia +2.500; Tasmania -200. Trend terms: Northern Territory +300; ACT -300
Sydney-Melbourne air traffic:
The Sydney-Melbourne route is the third busiest air route in the world. The Sydney-Melbourne route is also a key measure of business activity. In the year to April 2016, the number of flights between Sydney and Melbourne eased from a record high of 60,155 (February 2016) to 59,926.
The annual growth rate of the number of Sydney- Melbourne flights eased further from the 33-month high of 7.3 per cent in December to 3.9 per cent in April, just below the decade average growth of 4.2 per cent.
Late last year the increase in the number of flights between Sydney and Melbourne led to an easing in the moving annual load factor to 81.15 per cent in October – a 28-month low. But the average load factor has since lifted in the following six months to an 11-month high of 81.9 per cent in April in line with the slower growth in the number of flights and a continued lift in passenger numbers.
In April, the number of passengers on the Sydney- Melbourne route was up by 5.2 per cent on a year ago to 724,216. In the year to April a record 8.74 million passengers were carried between Sydney and Melbourne. Smoothed annual growth in passenger numbers rose from 3.6 per cent to 3.8 per cent.
All domestic air routes
Across all domestic air routes (not just Sydney-Melbourne) the rolling average load factor (proportion of seats occupied by passengers) held steady at a 29-month high of 76.7 per cent in April.
In the year to April, 58.1 million passengers were carried on domestic air routes, up 1.4 per cent over the year and the strongest growth in 25 months.
Why is the data important?
The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.
If more people are employed, then there is greater spending power in the economy. But at the same time companies may adjust the work hours of employees. If employees work less hours, and therefore get paid less, then spending power in the economy is reduced.
The Bureau of Infrastructure, Transport and Regional Economics (BITRE) releases regular aviation data. The BITRE releases the Australian Domestic Airline Activity publication each month as well as the Domestic Air Fares publication. The data provides insights on airline activity as well as trends in the broader Australian economy. If more people are flying, then it suggests businesses are more active and/or consumers are more confident.
What are the implications?
While the modest lift in job numbers adds to spending power, probably more important is job security. Those with jobs will be heartened at the low jobless rate, giving them confidence to spend.
The lift in domestic airline passengers is encouraging for the airlines as well as related services.
Craig James is the chief economist at CommSec.
