REPEAT: MNI DATA: Spare Capacity a Sticky Point for RBA MonPol

Repeats Story Initially Transmitted at 01:28 GMT Mar 22/21:28 EST Mar 21

By Sophia Rodrigues

     SYDNEY (MNI) - The pace of jobs growth in Australia slowed for the second

straight month, keeping the jobless rate around 5.5% and posing risk for the

outlook for spare capacity to slowly decline and therefore for pickup in wage

growth.

     The data poses downside risk for a hike in the Reserve Bank of Australia's

cash rate by this year-end but  keeps intact possibility for a hike in the early

part of next year.

     Data published by the Australian Bureau of Statistics Thursday showed the

number of employed persons rose 17,500 in February, falling short of MNI median

forecast for +20,000. In the two months this year, the average monthly gain was

+15,000. In the last six months, the monthly average is +26,200 compared with

+43,200 six months prior to that.

     Labor participation rate rose, leading to rise in the unemployment rate to

5.6% from 5.5%, and disappointing expectation for the jobless rate to remain

unchanged at 5.5%.

     Despite the two headline disappointments, the data could be described as

mixed as full-time jobs rose, monthly hours worked increased, labor

participation rose and employment-to-population ratio remained elevated.

     The unemployment rate has hovered around 5.5% mark (range 5.4% to 5.6%) for

ten straight months, indicating the rate is likely to remain sticky around this

level unless the last year's trend of strong job gains continues this year, or

labor participation rate declines.

     This is a key risk for the Reserve Bank of Australia's outlook for slow

decline in the jobless rate. It is also a risk for expectations for cash rate

hike late this year as the RBA may need to feel some confidence that jobless

rate will fall towards 5.0% before it brings rate hike discussion on the table.

     In the February Statement on Monetary Policy, the RBA said, "It is unclear

whether participation rates will increase further and, if so, by how much; this

represents an uncertainty around the question of how spare capacity in the

labour market is likely to evolve."

     Other indicators in the data also validate the risk for decline in spare

capacity. Underemployment rate rose slightly to 8.4% in February from 8.3% in

November, and labor underutilization rate also increased to 13.9% from 13.8%.

     But offsetting some of the risk is the fact that employment continues to

grow and in the latest month, the gain were entirely due to increase in

full-time jobs. In line with this, monthly hours worked rose. Such outcomes are

positive for household income and thus for outlook for household consumption,

and growth.

     Below are key details of the labor force data for February:

                                           February                      January

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

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

                                                            +12,500(revised from

Employed Persons                            +17,500                     +16,000)

                           +20,000 (range +7,500 to

MNI Consensus                              +30,000)

                                                           -53,200 (revised from

Full-time Employment                        +64,900                     -49,800)

                                                           +65,600 (revised from

Part-time Employment                        -47,400                     +65,900)

Unemployment Rate                              5.6%     5.5% (revised from 5.5%)

MNI Consensus             5.5% (range 5.3% to 5.6%)

Participation Rate                            65.7%          65.6% (no revision)

MNI Consensus                                 65.6%

                                                            -6,800 (revised from

Unemployed Persons                           +8,900                      -7,900)

Employment to

Population                                    62.0%          62.0% (no revision)

Underemployment Rate                           8.4%  8.3% (No revision from Nov)

                                                       13.8% (revised from 13.7%

Underutilization Rate                         13.9%                         Nov)

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

[TOPICS: MTABLE]