Thursday, 11 September 2008

Australian Labour Market Resilient in August

The Australian labour market added a net 14,600 jobs in August, well ahead of market expectations. Before we start popping champagne corks and declaring the possibility of an Australian recession dead in the water, we should remind oursleves of what labour market data tells us.

Firstly employment is a lagging indicator. From the graph above you can see that the moving average was still positve at the beginning of the last two sessions. By the time the employment numbers confirmed the recession, it was half over.

In a recession you would expect to see several consecutive months of job losses exceeding -20k. However as stated above if you wait for those kind of numbers you will have missed the boat.

So job ads remain the best forward looking indicator for the job market and although they have weakened considerably over the last six months they would need to worsen a lot more to get near recessionary levels. If we do get several consecutive monthly eclines in payrolls it's likely not to be until the first half of 2009.

As stated above the Australian economy need to creat between 15 -20k jobs a month just to keep the unemployment rate constant. However, the unemloyment rate dropped from 4.3% to 4.1% in August. This simply reflects the fact that the number of people looking for work fell in the month of August as shown in the fall in the particpation rate.