The banks weigh in on the upcoming Australian labour market report due at 00:30 GMT, 08:30 HKT
ANZ: We expect a more moderate rise of 10k jobs in October after the 20K rise in September. Business conditions remain elevated and ongoing strength in job ads suggest that the labour market should continue to improve. The recent strength in employment, however, has brought growth out of line with some leading indicators, so we anticipate the next few months will see more moderate gains. We expect the unemployment rate to remain stable at 5.5%.
CBA: The Australian labour market should continue to show strength with 23,000 jobs forecast to be added in November. Leading indicators including ANZ Job Ads and ABS Job vacancies, as well as the employment index within the NAB Business survey continue to suggest reasonable jobs growth.
NAB: The underlying story remains of positive forward indicators that suggest the recent run of strong employment growth should continue. Trend employment growth of 24k a month will continue to put downward pressure on the unemployment rate and NAB thinks the unemployment rate is likely to reach 51/4% by mid-2018. However, for this month NAB sees some downside risks to employment growth due to unfavorable sample rotation effects in the survey that underpins the employment numbers. Each month 1/8th of the sample gets replaced with a new sub-sample and if their characteristics differ this can impact on printed employment growth in the month. This month the outgoing sample that will be replaced has a higher tendency to be employed compared to the sample as a whole (employment to population ratio of 62.8% compared to the sample as a whole of 61.6%). If the outgoing sub-sample is replaced with a sample that is more similar to the rest of the 7/8th of the survey, it could drag on employment growth in the month. NAB estimates that this potential drag could be worth around 12-34k. NAB consequently forecasts a below consensus print of 12k for employment this month (consensus +20k). That said we continue to assess employment growth as relatively strong. As for the unemployment rate, this is typically less affected by sample rotation and we expect the unemployment rate to be unchanged at 5.5%.
Westpac: Total employment increased by 19.8k in September, broadly in line with the market median forecast of +15.0k and Westpac’s forecast of +25.0k. Part-time employment grew 13.7k, while full-time rose 6.1k, though importantly hours worked posted a solid 0.7% gain. September’s result was consistent with the positive momentum seen over 2017. After the Australian labour market went through a soft patch in 2016, employment gathered steam as we moved through 2017 rising 371k or 3.1% through the year to September. Westpac's forecast of a 20k rise will be a record breaking 13th consecutive monthly gain in employment. It may be tempting to look for a statistical correction but the strength of the labour market indicators in both consumer and business surveys suggest the underlying momentum remains very robust. The unemployment rate fell to 5.5% with the participation rate holding at 65.2% though August’s number was revised lower from 65.3%. In the month the labour force increased just 7.9k. Note that at two decimal places, participation fell slightly to 65.21% from 65.25%, with male participation falling to 70.7% from 70.8% and female participation falling to 59.8% from 59.9%. We are expecting the continuing robust growth in employment to draw more people into the labour force, particularly females. This is behind our forecast for a small rise in participation to 65.3% which will hold the unemployment rate flat at 5.5%.
Barclays: We expect employment conditions to remain robust and the unemployment rate to decline marginally in October.
Societe Generale: Although lead indicators such as vacancies and the like point to continued strength in Australia’s labour market, we expect a fairly clear deceleration in the October report. For one, quarterly annualised employment growth was 4.2% and 3.4% in 2Q and 3Q, respectively. That’s far higher than GDP growth in 2Q, and about the same as we currently predict for 3Q – which is clearly unsustainable, all the more so as this employment growth was largely generated in full-time jobs. Hence, we expect a more modest gain of 15k in October, equivalent to an annualised rate of 1.5%. Note however that year-on-year employment growth would remain at its near-ten year peak of 3.1%. There is also a statistical reason for expecting a weaker reading: the outgoing rotation group has a substantially higher employment to population ratio than the sample as a whole (by 1.2pp), and so if the new rotation group is more in line with the overall sample, the employment gain would be depressed.
We expect the unemployment rate to slip 0.1pp lower, given that at the current rate of participation, the monthly gain in the labour force is 17k, most of which will be absorbed by the 15k gain in employment. In addition, the steep increase in the participation rate over the past 11 months (by 0.8pp) is in our view unlikely to be fully sustained, and we expect a marginal decline (though not large enough to push over the rounding point to 65.1%). That said, sample rotation points to a risk of increase.
TD Securities: We expect another outsized employment report as Oct and Nov tend to be seasonally robust employment months (chart) and we assume a similar impact this year, looking for +30k for both months. This leaves annual growth close to 3% and keeps the u-rate at 5.5% (if the participation rate ticks up as we expect to 65.3%).
16 Nov 2017 - 00:05- EquitiesData- Source: ANZ/CBA/NAB/Westpac/Barclays/Societe Generale/TD Securities
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