Westpac: Clear Upside To Labour Market Expectations

Ahead of today’s labour market report Westpac note that “the 11.5k decline in employment in January marked the second consecutive fall in jobs growth from the Labour Force Survey. With a three-month average increase in employment of just 1k and annual growth in employment moderating to 3.0%yr in January from 6.8%yr in October, it raises the question - whether the Australian labour market stalled into early 2023.”

• “The positive is that the January survey reported a larger-than-usual number of people indicating that they have a job to go to in the future. This, coupled with the recent run of soft prints, suggests that employment growth should bounce in the February survey.”
• “We are, however, cautious about forecasting a particularly large rise in employment given the uncertainty around holiday and illness dynamics.”
• “We have pencilled in a 50k rise in employment for February, but risks are clearly to the upside.”
• “On our expectation is that the participation will hold flat at 66.5%, the unemployment rate edges lower, from 3.7% to 3.6%.”
• “If, alternatively, the jump in employment is much larger than our 50k forecast, a sharp move lower in the unemployment rate will not necessarily occur. This is because, a significant proportion of those not employed in January but with a job to go may have been out of the labour force. So, upon return, they will not only boost employment but also participation.”