Clouded Jobs

Economist dissect clouded jobs data

AUGUST employment estimates were the focus for economists this week, though the numbers were clouded by two things.

ONE was the realignment of the data to new population estimates, lowering estimated employment growth by about 30,000 to 214,000 in the year to July.

But even after the revisions there was plenty of room for doubt.

ANZ's Justin Fabo said the effect of immigration was still uncertain, and the most recent population estimates rested on projections which seemed too high.

"For both these reasons, we could see further downward revisions to growth in the civilian population and employment down the track," he said.

The other complication was new job search rules for Newstart allowance claimants from July 1.

If the sizeable jump in workforce participation over July and August was mainly caused by the new rules, then the jobless rate in August would probably have been 6.0 per cent, not 6.2 per cent as reported.

That would put it right in line with the average for May and June.

But economists were cautious in interpreting the jobless rate.

HSBC's Paul Bloxham focused on the trend in employment.

"Our take is that the re-balancing of growth in the economy is progressing, albeit slowly, and is creating jobs."

Commonwealth Bank's John Peters stood back to see the wider view.

"All up, these changes did not alter the underlying picture of a resilient jobs market with annual jobs growth of two per cent in August despite sub-par economic growth of near two per cent," he said.

"Leading indicators of jobs still point to more jobs growth ahead."

Royal Bank of Canada's Su-Lin Ong also accentuated the positive.

"While complicated by revisions, the upshot remains a stable, albeit elevated, unemployment rate, with job creation firmer than would be expected given the sluggish pace of activity," she said.

JP Morgan's Ben Jarman also took the so far, so good view.

"The picture of the labour market we have in hand is one of stability in the unemployment rate over the last year, and a clear improvement in hiring conditions, as shown by job advertisements, the business surveys, and the trend up in the employment to population ratio," Mr Jarman said.

Janu Chan at St George also highlighted the unusual pattern of growth and employment.

"The labour market has continued to defy what would be expected, given the below average pace of growth in the economy," she said.

Justin Fabo looked past unemployment to the employment-to-population ratio, which is unaffected by changes in participation, and continues to edge higher.

"This is a sign of a slowly improving labour market and is consistent with labour demand indicators like job ads and the business surveys," he said.

But it may not last.

"Our view is that employment growth will ultimately slow given the soft domestic and global backdrops," the ANZ economist said.