Surprise Fall In Headline Employment, Plenty Of Caveats

July’s labour market report revealed a surprise 40.9K fall in the headline employment figure (BBG median looked for +25.0K, with the low of the range of estimates sitting at -10.0K), coming hot on the heels of last month’s much stronger than expected headline gain of 88.4K jobs. A fall in full-time employment (-86.9K) drove the headline move, with part-time employment rising (+46.0K).

• This came as the participation rate unexpectedly fell to 66.4% from 66.8%, which meant that the unemployment rate actually managed to fall by 0.1ppt, hitting a fresh cycle low of 3.4% in the process.
• The ABS noted that “this is the first fall in employment since October 2021, following the easing of restrictions after the Delta lockdowns in late 2021. During the pandemic, it has not been uncommon to see larger-than-usual changes or slowing in employment and hours around school holidays…The July reference period coincided with the winter school holidays, worker absences associated with COVID and other illnesses, and further flooding events in New South Wales.”
• “In line with the fall in employment, and continued illness-related worker absences, seasonally adjusted hours worked fell by 0.8% in July 2022. In addition to people taking annual leave around the winter school holidays, there were also around 750,000 people working fewer hours than usual due to being sick in July 2022, around double the usual number we see during the middle of winter. Given the extent of sickness within the community during July, some people who were on annual leave over the school holidays may have also been sick or caring for others.”
• These caveats mean that the headline figure won’t pose too much of a concern re: an imminent turnaround in labour market strength, although some are beginning to flag signs that may suggest more caution is required in the months ahead (see the ‘Big 4’ previews we flagged ahead of the release).
• A reminder that some noted that the sample rotation in this month’s labour market report also posed downside risks to the headline jobs figure.
• Note that the number of unemployed people still fell by 20.2K in July.
• Elsewhere, the underemployment rate nudged down to 6.0%, falling by 0.1ppt, hovering a touch above its cycle low of 5.7%, while underutilisation fell by 0.2ppt to register a fresh cycle and multi-decade low at 9.4%.