MNI DATA ANALYSIS: Australia Labor Data Validates RBA Optimism

--Jobless Rate Lowest Since November 2012

--Unemployed Numbers Down Three Straight Months

By Sophia Rodrigues

     SYDNEY (MNI) - The number of employed fell for the first time in five

months, but the unemployment rate fell to the lowest since November 2012 as

participation rate also dropped.

     The data supports the Reserve Bank of Australia's view that the economy is

making progress towards its goal of lowering the jobless rate but given the

uncertainty around participation rate, this could change in the next few months.

Still, the August labor market data was solid despite the fall in employed

numbers.

     Data published by the Australian Bureau of Statistics Thursday showed the

economy lost 3,900 jobs in July, compared with MNI median forecast for a 11,000

gain. This was the first fall in five months, and only the second in 22 months.

     The fall followed an upward revision in June employment to 58,200 from

50,900, and in the seven months so far this year, the economy has added jobs at

an average rate of 17,100. This outcome is in line with the RBA's expectation

that the pace of jobs growth could slow from last year's strong gain, but would

still remain solid.

     In the latest month, the decline was due to fall in part-time jobs which

offset the solid 19,300 rise in full-time jobs.

     The jobless rate fell to 5.3%, the lowest since November 2012 when the

unemployment rate was last seen at this level. The participation rate fell to

65.5%, a pullback to the level seen in May. The employment-to-population ratio

declined to 62.1% but this was still above May's 61.9%.

     Hours worked rose 3.1 million hours to 1,748 million. The number of

unemployed fell 5,700 after a 3,300 drop in July. The number of unemployed has

fallen for three straight months with a total decline of 33,500 during this

period.

     In the August Statement on Monetary Policy, the RBA said that leading

indicators suggest that employment will continue to grow faster than the working

age population but it is unclear whether the increase in labor demand will be

met by those who are currently unemployed finding jobs which would lead to a

reduction in the unemployment rate, those who are currently employed working

more hours, or an increase in the participation rate. 

     The RBA also said that it is possible that the forecast for above-trend GDP

growth over the next few years will result in a sharper decline in the

unemployment rate than expected, which could lead to a stronger pick-up in wages

growth than forecast.

     But apart from uncertainty over how much the jobless rate would fall, the

RBA also said there is  uncertainty about the level of the unemployment rate

that is consistent with stable inflation, which has to be inferred.

"International experience suggests that these estimates may decline as the

unemployment rate falls. If so, upward pressure on wages growth could be less

than expected," the RBA said.

     Below are key details of the labor force data for August

                                              August                        July

--------------------------------------------------------------------------------

                          (M/M, seasonally adjusted)  (M/M, seasonally adjusted)

                                                           +58,200 (revised from

Employed Persons                              -3,900                    +50,900)

                           +11,000 (range -22,000 to

MNI Consensus                               +30,000)

Full-time Employment                         +19,300                     +43,200

Part-time Employment                         -23,200                     +15,500

Unemployment Rate                               5.3%          5.4% (no revision)

MNI Consensus              5.4% (range 5.3% to 5.4%)

Participation Rate                             65.5%         65.7% (no revision)

                          65.7% (range from 65.6% to

MNI Consensus                                 65.7%)

Unemployed Persons                            -5,700                      -3,300

Employment to

Population                                     62.1%                       62.2%

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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