The Australian jobs report for October turned out to be a blockbuster, smashing expectations of a 14.8K gain in hiring by churning out an impressive 58.6K increase. To top it off, the unemployment rate improved from 6.2% to 5.9% – its lowest level since April 2014. Total employment rose to a record-high level of 11,838,200.
And that’s not all! The previous report also enjoyed an upgrade, from initially showing a disappointing 5.1K drop in hiring to just a meager 0.8K reduction. But are these figures too good to be true? And what do these imply for RBA policy and AUD forex price action? Let’s take a closer look at the components and labor market trends to find out.
Quality of jobs
Unlike the October jobs data from Canada which revealed that most of the employment gains were spurred by part-time hiring, Australia’s labor report indicated that 40K full-time positions were added out of the 58.6K total employment change.
At the same time, overall unemployment fell by 33.4K, representing a 4.3% year-over-year decline. The number of jobless folks looking only for full-time work fell by 30.3K while the number of those looking for part-time work decreased by 3.1K, indicating that there were enough vacancies to fill these requirements.
Labor force participation
Now if you’re thinking that the huge drop in the unemployment rate was simply spurred by lower labor force participation, think again! The participation rate actually improved from 64.9% in September to 65% in October on a seasonally adjusted basis, suggesting that Australians have returned to the labor force to resume their job hunt.
Number of hours worked
The October jobs report also showed that the number of hours worked increased 1.2% or 19.1 million, which is its seven-year high. This means that businesses are starting to pick up the pace, supported partly by the RBA’s interest rate cuts earlier in the year.
A survey conducted by the National Australia Bank revealed that this pickup could be sustained, with the tourism and services industries showing increased hiring intentions. After all, the Land Down Under has been able to benefit from weakening Aussie forex rates, making vacations in Melbourne or scuba-diving trips to the Great Barrier Reef less expensive and more attractive for tourists.
ABS seasonal adjustments
Nope, not talking about my six-pack abs right here! I’m referring to the changes in the way that the Australian Bureau of Statistics (ABS) has made when it comes to accounting for seasonality – something that has drawn a lot of skepticism lately.
Some forex market analysts have pointed out that the jobs figures are probably overstated and that huge revisions are to be expected. Still, looking at the trend estimates which aren’t adjusted for seasonal factors shows strengthening employment figures at a more credible pace.
At the end of the day, these improvements – seasonally adjusted or not – were enough to convince most forex market watchers to pare expectations for an RBA interest rate cut. This underscores the RBA’s less-dovish monetary policy statement, which which highlighted a “somewhat stronger growth in employment and a steady rate of unemployment.” No wonder Governor Stevens said that “prospects for an improvement in economic conditions had firmed a little” recently!
With that, the Australian dollar had a strong bullish forex reaction to the report, but the rally was soon faded when traders started doubting the reliability of the ABS estimates. Even so, these latest readings might be enough to keep the Aussie supported against its forex counterparts, particularly those battling worse economic troubles, until we get wind of any major revisions of course.