Australian Markets Weekly
A weekly outlook for Australia, key global economies and markets
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The September employment data on Thursday will attract plenty of interest, coming after the record monthly employment increase of 121,000 in August. Recent leading indicators of employment (NAB employment index, ANZ job ads) have pointed to improving employment growth, but nowhere near as strong as what we saw in the August report.
The various changes the ABS made to the labour force survey methodology in July has clearly impacted on recent outcomes – in July we saw a fall in employment and a jump in the unemployment rate from 6.1% to 6.4%, while in August we saw a record gain in employment when the domestic economy remained quite soft.
The ‘real’ labour market story lies somewhere in between these extremes, so NAB’s forecast of -60,000 jobs for September is based on the assumption that the ABS employment series returns closer to its trend level in September.
But after the recent high levels of volatility, the forecast for September is very much a case of ‘pick a number’. The forecast range reported by Bloomberg is -100K to +30K. If NAB’s forecast of -60,000 is close to the mark, then we expect to see the unemployment rate rise to 6.3% from 6.1%, with some offset coming from the participation rate easing back to 65.0% from 65.2%.
Health, Education and Retail leading the job gains
Since the August monthly labour force release, the ABS has recently released the quarterly industry employment data. From the industry data we can gauge where the big increases in employment were during the August quarter, most of which would have happened in the August month as total employment grew by just 14K (net) through June and July.
The industry data show the biggest employment increases in the three months to August were in education and training (+32K), health care (+30K) and retail trade (+26K). The health and education gains come as no surprise, as these two sectors account for a large slice of the total jobs growth over the past five years. The retail gain is a bit more surprising given the soft conditions in the sector, the rise of online retail and low levels of consumer confidence, but it does come after several years of poor retail employment growth.
The other sector of the economy that has contributed plenty of jobs in recent years is business services, which consists of financial, property and professional & scientific services. It has added over 230,000 jobs in the past five years, but in the August quarter it saw little growth.
The industry data also highlight the job shedding in the mining industry with 27,100 jobs lost in the August quarter, with more losses likely in coming quarters. However some of these losses will continue to be absorbed by the construction sector, which has seen solid gains over the past 18 months. Construction employment rose 15K in the August quarter.
In Australia, the RBA meets on Tuesday and is universally expected to again leave the cash rate unchanged at 2.50%. The market will also be paying close attention to the words in their Media Release, especially references to the housing market, given their rising concern for investor housing, especially in Sydney and Melbourne. We also expect the RBA to maintain their final policy outlook statement that “the most prudent course is likely to be a period of stability in interest rates”.
On Friday, August housing finance approvals are released, an indicator that is fast becoming one that’s garnering top flight status given the policy interest in housing. Little growth in the number of owner-occupied housing loans is expected in August, but a key focus will be the value of investor housing, that showed accelerated growth of 6.8% in July.
Offshore, the highlight of the week will be the US FOMC’s Minutes from their September 16-17 meeting, released Thursday morning AEDT. The Bank of Japan and Bank of England policy meetings are also held this week.