G’day, forex mates! If you’re hunting for a potential catalyst for the Aussie, then heads up since the Australian Bureau of Statistics (ABS) will be releasing Australia’s latest jobs report tomorrow (December 14, 12:30 am GMT).
And if you’re planning to trade that top-tier event and need a quick rundown on what happened last time and what’s expected this time, then you better gear up by reading up on today’s Event Preview.
What happened last time?
- October employment change: +3.7K vs. +17.5K to +18.8K expected
- September employment change: ugraded from +19.8K to +26.6K
- Jobless rate: 5.4% vs. steady at 5.5% expected
- Labor force participation rate: 65.1% vs. steady at 65.2% expected
Australia’s October jobs report revealed that the Australian economy only saw a net increase of 3.7K jobs, significantly missing expectations that Australia will generate between 17.5K to 18.8K jobs in October.
However, other details of the jobs report were more positive since jobs growth in September was upgraded from +19.8K to +26.6K.
In addition, full-time jobs actually grew by 24.3K in October, which marks the third straight month growth in full-time jobs. These were partially offset by loss of 20.7K part-time jobs, resulting in the net employment change of only 3.7K.
Moreover, the jobless rate improved from 5.5% to 5.4%, which is the best and lowest reading since February 2013.
Although it’s a bit disappointing that the improvement in the jobless rate was partially due to the labor force participation rate deteriorating from 65.2% to a three-month low of 65.1%.
In summary, net employment change in October failed to meet expectations, which is why the Aussie’s initial reaction was to take a dive. Overall, however, the October jobs report was actually mixed and even somewhat positive since full-time employment continued to grow, which is likely why the Aussie quickly recovered.
What is the market expecting this time?
- Employment change: +18.1K to +19.0K expected vs. +3.7K previous
- Jobless rate: steady at 5.4% expected
- Labor force participation rate: steady at 65.1% expected
There is no consensus figure on jobs growth but forecasts typically fall between a range of +18.1K to +19.0K, so there’s at least a consensus that jobs growth picked up the pace compared to October’s net employment change of +3.7K.
Also, economists forecast that the jobless rate and labor force participation rate held steady at 5.4% nd 65.1% respectively.
And here’s what the leading indicators have to say:
- AIG’s performance of manufacturing index (PMI) report noted that the manufacturing sector’s “employment sub-index strengthened a further 1.7 points to 54.9 points in November, indicating further recovery in manufacturing employment, mainly in food & beverages.”
- Next, AIG’s performance of construction index (PCI) report revealed that the employment sub-index for the construction sector improved by 2.9 index points to 55.3.
- However, AIG’s performance of services index (PSI) report showed that “Employment growth [in the service sector] slowed in November with the sub-index dropping 1.2 points to 52.1.”
- As for the National Australia Bank’s (NAB) employment index, that held steady at 7 index points. However, NAB also noted that “By industry, a majority of industries actually saw a deterioration in the employment index for November, but that was offset by strength in finance/ property/ business services (up 10 points) and to less an extent mining.”
The available leading indicators are sending mixed signals, but they seem to be leaning more towards a slowdown since NAB mentioned that “a majority of industries actually saw a deterioration” in employment despite the headline employment index holding steady at 7 index points.
AIG, meanwhile, noted that employment in the labor-intensive service sector still grew, albeit at a slower pace, since the service sector’s employment sub-index deteriorated by 1.2 points to 52.1.
Okay, what about historical tendencies?
Well, the consensus that jobs growth will pick up the base certainly has a historical basis since jobs growth in November tends to be stronger compared to October.
As to how economists fared with their guesstimates, they apparently tend to be too pessimistic and/or conservative since there have been far more upside surprises than downside surprises.
Historical data for the jobless rate, meanwhile, don’t really offer any meaningful clues.
To summarize, the available leading indicators are mixed but seem to lean more towards a possible slowdown in jobs growth. However, this contradicts the consensus that jobs growth will pick up, which is supported by historical data.
Also, probability is skewed more towards an upside surprise for jobs growth, given how economists have historically fared with their guesstimates. Just keep in mind that we’re playing with probabilities here, so there’s no guarantee that the historical trend will hold.
Anyhow, the Aussie usually has an initial reaction depending on how the reading for net employment change turns out, with a better-than-expected figure usually triggering a quick Aussie rally while a worse-than-expected reading usually results in a quick Aussie selloff.
As for follow-through buying (or selling), that’s usually determined by the other details of the jobs report, with full-time employment generally in focus.
Do keep in mind, though, that the Aussie also takes directional cues from gold, so it may be wise to keep an eye on gold prices as well. You can check slightly delayed gold prices in our Live Market Rates. Or if you prefer real-time data, you can go here.