Unlike the two previous reports on the labour market, today’s data for December revealed dynamics that better align with subdued conditions in key parts of the economy. The gain in employment last month was a still-decent 13,500, slightly above economists’ expectations, but there was an unexpected rise in the jobless rate to a six-month high of 5.8%. This, however, reflected a lift in the participation rate, which normally is a sign of decent underlying momentum. Also, hours worked across the workforce rose in December, another positive sign.
The two previous jobs reports for October and November had shown very large gains in employment that appeared too good to be true. This was particularly so in the context of the recent National Accounts, which revealed the economy actually had contracted in the September quarter. The big rises in full time employment in each of those two months (averaging more than 40,000 positions – well above economists’ expectations) had looked especially implausible, but had underpinned a fall in the jobless rate to a three-year low of 5.6%.
The further piece of good news today is that most of the jobs created in December were for full timers (up another 9,300 positions), with part time positions gaining 4,200. Full time positions now have expanded for three straight months, but this is the first gain in part time employment since last September. Annual growth in total employment in December rose a touch to a still-underwhelming 0.8% over the year.
The decent gains in employment for the final three months of 2016 (an aggregate gain of 67,100 net positions) supports the argument that the economy probably expanded at a decent rate in the December quarter. Indeed, today’s data indicates that Australia’s economy almost certainly avoided the technical recession (two consecutive quarters of falling real GDP) that some economists had feared.
That said, there are enough pockets of weakness in the economy, including slackness in national business investment and activity in the previously booming resources states, that probably will limit gains in employment in the months ahead. Indeed, the unexpectedly robust job gains of the last three months are very unlikely to be repeated. Still, even with large regional differences, employment growth should be sufficient to keep the national jobless rate broadly stable from here.