Robust Australian Employment Report - A positive sign for the Australian Stock Market

Team Veye | 29-Jan-2019 Robust Australian Employment Report

Australia’s labour market trend has been robust over the last few years with annual job growth of 2.2% which has been ahead of the 1.6% rise in population. The full-time positions expanded by almost 2% in 2018. The Australian Bureau of Statistics (ABS) highlighted that a net 21,600 new jobs were created in Dec, down from the revised number of 39,000 the month before but surpassing market forecasts of a 16,500 increase.

This data was welcomed by policymakers who were counting on labour market strength for a long-awaited pick up in wage growth and inflation in the face of a downturn in the property market. Some aspects of the report were not quite as impressive, with full-time positions that tend to offer higher wages and greater security declining by 3,000, adding to falls in November. This meant that the increase in employment in December was entirely led by part-time work. The easing of participation rate to 65.6% December also helped bring down the unemployment rate to 5.0%. 

In parallel, Australia’s once-booming property market is witnessing a sharp downturn with prices in Sydney falling at the fastest pace in two decades with further drops expected this year. Yet, leading indicators of labour demand still point to further employment growth in Australia in a positive sign for household spending. An index of vacancies released by the department of jobs and small business showed there were 185,547 skilled job vacancies in December, the highest in 6.5 years.

It is expected that this will give the Reserve Bank of Australia’s (RBA) confidence that the A$1.8 trillion economy was on the right track. The Bank has been holding the cash rate at a record low 1.5% for almost 2.5 years now while repeatedly signalling the next move would be an increase. But this move will now largely depend on fourth-quarter inflation report due next week with economists generally expecting growth in prices to slow, an outcome that could add to the case for a rate cut.

Like GDP, rate of employment illustrates the development and the strength of the economy. The Jobs Report statistics are used to assist government policy makers and economists in determining the current state of the economy and in predicting future levels of economic activity. Investors follow this number closely and stocks generally rise or fall with good or bad employment reports, as investors digest the potential changes in these areas. So, our analysts anticipate that the positivity of this report will continue to strengthen the Australia Stock Market.  

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