G’day, forex mates! The Australian Bureau of Statistics (ABS) will be releasing Australia’s May jobs report tomorrow (June 15, 1:30 am GMT). And if you’re planning to use this top-tier event to catch some pips, then you better gear up by reading up on today’s Event Preview.
What happened last time?
- April net employment change: +37.4K vs. +4.5K expected
- March Net employment change: slightly downgraded from +60.9K to +60.0K
- Jobless rate: 5.7% vs. steady at 5.9% expected
- Labor force participation rate: steady at 64.8% as expected
The Australian economy saw a net increase in employment of around 37.4K during the April period. This is great because the consensus was a small increase of only 4.5K.
Jobs growth in April is slower compared to March, though. Also, jobs growth in March was slightly reduced from +60.9K to +60.0K, which is slightly disappointing.
Another disappointing detail is that jobs growth in April was driven by the 48.96K increase in part-time employment, which was partially offset by the loss of 11.60K full-time jobs.
This is the first loss of full-time jobs after two consecutive months of net increases. Even so, the Australian economy has been seeing a net increase in jobs for seven months straight (as of April), and that’s still a positive sign for the economy.
Looking at the other details, the seasonally-adjusted jobless rate tumbled to 5.7% in April instead of holding steady at 5.9% as expected. This is lowest reading for the jobless since January 2017, which is good.
Even better, the labor force participation rate was steady at 64.8%, which is the shared best reading since July 2016.
Meanwhile, the number of unemployed blokes and sheilas fell from 751K to 732K.
Overall, Australia’s April jobs report was pretty good, with the loss in full-time jobs and downgraded reading for March being the only disappointments.
And since the jobs report was positive overall, the Aussie ended up getting bid higher across the board.
What is the market expecting this time?
- Employment change: +10.0K expected vs. +37.4K previous
- Jobless rate: steady at 5.7% expected
- Labor force participation rate: steady at 64.8% expected
The general consensus among most economists is that the Australian economy generated around 10.0K jobs during the month of May, which is obviously a smaller increase in jobs compared to April.
Meanwhile, the jobless rate and the labor force participation rate are forecasted to remain unchanged at 5.7% and 64.8% respectively.
Okay, time to take a looking at the available leading indicators. First up is AIG’s performance of manufacturing index (PMI). And unfortunately, it fell by 4.4 points to 54.8. The employment sub-index also fell, but not as much, tumbling by 1.7 points to 54.2. The employment sub-index is still above the 50.0 neutral level, so employment in the Australian manufacturing sector still grew, albeit at a slower pace.
Next up is AIG’s performance of construction index (PCI), and its headline reading jumped by 4.8 points to 56.7. Even better, the employment sub-index for the construction sector improved by 5 points to 54.6, so there was stronger jobs growth in the construction sector, according to anecdotal evidence compiled by AIG.
As for AIG’s performance of services index (PSI), the headline reading sadly eased from 53.0 to 51.5. Worse, the employment sub-index fell from 51.9 to 49.2, which is below the 50.0 level. Employment in the labor-intensive service sector therefore contracted, according to AIG’s findings.
Finally, the employment index from the National Australia Bank’s (NAB) most recent Monthly Business Survey fell from 7 index points to 6 index points in May. Despite the dip, commentary from NAB noted that a reading of 6 index points is still “well above the long-run average for the series.” As such, the reading “is consistent with the recent lift in employment growth according to ABS data and suggests the strength is likely to continue in coming months.”
Moving on to historical trends, economists tend to undershoot their guesstimates for net employment change in May, which has resulted in more upside surprises.
Also, the smoothing effect of seasonal adjustments mean that the previous reading usually gets a downgrade.
To sum it all up, the available leading indicators point to slower jobs growth in May, so the consensus readings looks about right.
However, there probability is skewed more towards an upside surprise because economists historically have a tendency to undershoot their projections. Also, seasonal adjustments have historically resulted in downward revisions for April’s reading.
In any case, just remember that a better-than-expected reading for net employment change generally causes the Aussie to jump higher. The Aussie’s reaction to the previous jobs report is a good example of this. Conversely, a worse-than-expected reading usually results in the Aussie getting dumped.
For follow-through buying or selling, details such as full-time employment and the participation rate usually come into play. However, the Aussie is a higher-yielding comdoll so commodities, namely iron ore, and risk sentiment usually have more weigh in dictating the Aussie’s price action.