These three charts summarise the state of the labour market — and the September employment report.
The good news is that the trend in hours worked is firm — in typical cycles hours pick up first, then job ads, and finally employment.
The bad news is that we are still seeing job losses at a decent clip — the chart below shows that the September gross flows data revealed a spike in transitions from employment to unemployment. The monthly data is noisy, but an uptrend in separations to unemployment is clear.
The ugly is the decline in the employment to population ratio. The decline in participation has been hiding the weakness in the labour market. It’s tough to find a job, so folks have quit looking for one.
I think there’s decent prospect that the upturn in the interest rate sensitive sectors will eventually lift employment. The hours worked story is a nice lead, and the flattening out (after a hug fall) of job ads is very encouraging.
It’s too early to be sure that the unemployment rate has peaked, and there remain troubling parts of the jobs report, but without an ongoing rise in the unemployment rate it’s hard to see the RBA cutting again.
Following this report, I put the odds of a cut this year at less than 20%