Australia: Headline employment softer, but positives lie deeper below – TDS

Analysts at TDS note that the Australian employment in February fell by –6.5k via +27.1k full-time employment and –33.5k part-time and although the participation rate was unchanged at 64.6%, the unemployment rate increased from 5.7% to 5.9%.

Key Quotes

“It was hard for the market to ignore these softer headline prints and accordingly the AUD was sold down while bond yields dropped.”

“Headline employment reversed direction after gaining on average +22k jobs each month over Nov to Jan. On an annual basis growth in employment is steady, +0.9%. Despite full time jobs picking up in Feb, annual full time jobs growth remains elusive, -0.3%/yr (was –0.6%/yr in Jan) while part time jobs growth slowed, +3.4%/yr from +4.3%/yr in Jan.”

“The positives

• February is seasonally strongest month for job gains and today’s raw print was no exception at +214.5k.
• Hours worked picked up from +0.6%/yr in Jan to +0.9%/yr in Feb. Although, hours worked remains skewed towards parttime (+4.4%/yr), full-time hours worked enjoyed the first positive print since Apr’16 (+0.2%/yr).
• Delving further into the split, male full-time hours worked picked up +0.8%/yr from +0.5%/yr. This is a welcome development given prior data has pointed to underemployment of male employees in the past. A pick-up in hours worked AND male full time hours worked, if sustained, points to firmer employment conditions over coming months and would be supportive for our Nov RBA rate hike call.
• Employment by industry (qtrly data) will be released next week and should provide further clarity on whether the “turnaround” in Manufacturing continues, perhaps fuelling the pickup in FT employment and hours worked.
• AUD OIS is practically flat to cash, picking up 26% chance of a hike by year end. We see this as fair value for now, with many hurdles to jump before the RBA and market is ready for our November +25bp base case. The AUD is extending initial losses and is at US$0.7685 from US$0.7715 into the release.”