Annette Beacher, Chief Asia-Pacific Macro Strategist at TD Securities, explains that in 2018 to date +175k jobs have been created by Australian economy, skewed slightly towards full-time at 60%, but outsized employment gains are facing headwinds.
Key Quotes
“After last year’s 3-3 ½%/y annual employment pace, reliable leading employment indicators point to a new lower normal 2-2 ½%/y employment growth now and heading into 2019.”
“Employment and hours worked were so strong last year that annual growth rates this year suffer from adverse base effects, even if monthly prints are positive.”
“We look for employment to lift by +25k in September (median +15k but 6/25 look for +20k, range -6k to +30k) consistent with job ads and business surveys pointing to 2 ½%/y employment growth. When +25k/m is combined with our expected dip in the participation rate to 65.6% (mkt unch at 65.7%) the unemployment rate drops to 5.1%, barely a hair above the RBA’s soft target of 5%, and would be the lowest rate in six years (mkt unconvinced, looking for unch at 5.3%).”
“If we are wrong: September could be the correction we were looking for last month. If employment falls by 20k – led by full-time – and the participation rate remains unchanged at 65.7%, the unemployment rate jumps to 5.6%, back to April levels after months of hard-won gains into eroding spare capacity and lowering underutilisation ratios.”
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