Australia: Employment likely to fall by -5k in February – Westpac

Justin Smirk, analyst at Westpac, suggests that their -5k forecast for February is more about monthly volatility than the start of a new trend for the Australian economy, after the total employment lifted a solid 39.1k in January, well clear of the market median of 15k.

Key Quotes

“The year started with a solid trend pace of employment growth with a three month average gain of 31.9k. While it is just one month into the year, employment has gained 271k in the year to January (2.2%yr) with a very solid 2.9%yr six month annualised pace.”

“There is, however, an important caveat – January is the peak holiday month in Australia as Christmas, New Year and school summer vacation all come together. Little business happens in Australia at this time.”

“We believe that employment growth is set to stall through the first half of 2019, in part due to uncertainty surrounding the April Federal election but also some payback for the earlier strength in the labour market. However, our -5k forecast for February is more about monthly volatility than the start of a new trend.”

“Despite the strong gain in employment, the unemployment rate was flat in January at 5.0% (market median was for 5.0%) as a 0.1ppt lift in the participation rate to 65.7% (65.72% at two decimal places) boosted the gain in the labour force by 45.7k.”

“Holding the participation rate flat at 65.7%, our forecast for a -5k fall in employment will see the unemployment rate tick up to 5.1%.”