Is Australia Open for Business Again?
Despite the decline in the resource sector, Australia just enjoyed its second month in a row in which job creation blew past expectations.
According to the Australian Bureau of Statistics (ABS), the country’s economy added 37,400 jobs in December, compared to economists’ consensus forecast of just 5,000.
Thanks to that performance, the unemployment rate dropped a tenth of a percentage point, to 6.1%, a further incremental improvement from the cycle high of 6.3% hit back in October. And the labor force participation rate rose by a tenth of a point, to 64.8%, up from October’s cycle low of 64.6%.
December also marked the third consecutive month of employment growth, with the number of jobs created in each of the past three months exceeding the monthly average over the trailing five-year period by a meaningful margin. Westpac notes overall employment grew by 1.9% for full-year 2014.
Also of note, the sizable gain first reported for November actually improved following the customary review of the initial numbers, with the revised figure at 45,000 jobs. That brings the two-month tally to 82,400 jobs, the strongest two-month period of job creation in eight years, according to Bloomberg.
Equally important, job creation in two of the past three months was driven by full-time jobs. Full-time jobs are generally considered to be of higher quality, owing to better pay and benefits, as well as greater stability.
In December, the economy added 41,500 full-time jobs, while part-time jobs declined by 4,100. For full-year 2014, Westpac says the creation of full-time jobs (up 1.9%) was slightly ahead of part-time jobs (up 1.8%).
The one less-promising detail in the report is that the number of hours worked, which can presage future employment demand, fell by 0.5% month over month.
Although the jobs report suggests a meaningful transition could finally be underway in Australia’s economy, that’s yet to flow through to consumer sentiment. In December, consumer confidence fell to its lowest level since late 2011, according to surveys conducted by the Westpac-Melbourne Institute.
But sentiment can be a lagging indicator, so the next survey could see a small pop, assuming the statisticians at the ABS have gotten their act together after last summer’s embarrassing retraction.
Meanwhile, a rise in job vacancies appears to lend credence to recent employment reports, though, of course, the ABS is gathering the data in both instances.
Nevertheless, the ABS reports that job vacancies rose by 2.6% during the quarter that ended on Nov. 30, following a quarter in which they declined by 0.4%.
Job advertisements, another measure of employment demand, increased for the seventh consecutive month in December, with a strong month-over-month rise of 1.8%, based on data gathered by the Australia and New Zealand Banking Group.
So while the ABS’ summer flub undermined its credibility, there’s enough evidence out there to suggest the sudden surge in jobs is “broadly believable,” as CIMB Securities senior economist Shane Lee put it in an interview with Bloomberg.
So which sectors are driving job creation? Job vacancies data seem to underscore what some jokers have apparently dubbed the economy’s “mining to dining” transition.
Vacancies for accommodation and food service jobs rose 35.8% during the quarter, followed by education and training (up 31.8%), and other services (up 33.3%), a category that encompasses a number of personal services ranging from repair and maintenance to household staff.
And it’s also important to give the housing boom its due. “It is reasonable to assume that the housing market accounted for a healthy portion of job growth in recent months, together with the education and healthcare sectors,” CommSec chief economist Craig James told The Sydney Morning Herald.
Regardless, the employment data’s upside surprise has afforded the Reserve Bank of Australia greater flexibility on the timing of its next rate cut.
Based on futures data aggregated by Bloomberg, a majority of traders are betting the central bank will cut its short-term cash rate by at least a quarter point at its April meeting, while a still-substantial 40.6% believe a rate cut could happen as soon as the March meeting.
The RBA has held its benchmark cash rate at an all-time low of 2.5% since August 2013.