The April employment report has led the the predictable ‘we was robbed’ response from many of those who got the May meeting wrong. I got the April RBA meeting wrong too, but you won’t read that assessment below. Rather, i think that the April report conforms pretty closely to the RBA’s assessment that employment is growing too slowly to eat up the slack (in trend terms).
Looking at the unemployment rates, the ongoing uptrend in joblessness is fairly clear, despite the decline to 5.5% (down 10bps) on the month The increase in the female unemployment rate is a bit of a concern, as it suggests that weakness may be spreading to the services sector (which has thus far been firmer than male dominated sectors).
The change in jobs (k per month) looks good, with solid gains in both part time and full time employment, however this should come with a health warning! The survey is designed to measure the unemployment rate, and it does a pretty good job of that – the employment number is mostly error from month to month. Notwithstanding, employment rose 50.1k, with full time jobs about two thirds (34.5k) of the total.
The participation rate has been moving around a lot of late (+20bps to 65.3%), so a better measure of the slack in the labour market is the employment to population ratio (+20bps to 61.7%). There was a tiny bounce in both the male and female employment to population ratios (though despite the +10bps rise to 67.7% on the month, the male ratio remains in a downtrend). This gave the impression that just maybe the ratio is stabilising … Maybe! Let’s hope.
A decent way to take the population noise out of the jobs data is to look at the change in the proportion of the population engaged in each type of work. On this measure, this was the best employment report in some time, with the full time proportion rising in a meaningful way for the first time in three quarters (the feb jobs explosion was mostly part time so i rate this as a much better report).
The uptrend in hours worked (+0.7%mom) is probably the most impressive part of the report. In ‘normal’ cycles the pattern is hours first, then job ads, then jobs, so the sharp move up in hours is very encouraging. As a level, hours are now above the q4 2011 peak, which is a decent sign that the RBA has some policy traction, and that things are turning around.
Finally, the matched v unmatched split of jobs growth is very encouraging (to the extent you think my seasonal adjustment is reliable!). All of the jobs growth in April came from an increase in employment among the ‘seasoned’ part of the sample.
You can see above that the change in matched sample and unmatched sample employment is extremely large from month to month. I am not sure i am doing this correctly, but to the extent that you trust it, the message is that sample rotation actually detracted materially from employment growth – so that but for sample rotation employment would have been even better. Take the apparent levels with a grain of salt, but the key point is that this is probably not noise (like Feb).
So if this is such a good quality employment report, why do I not think the RBA made a mistake on Tuesday? Because there is loads of slack in the labour market (see the employment to population ratios) inflation is low, and I am still pessimistic about how the end of the mining boom will pan out.