Westpac is out with its preliminary analysis of today’s employment report and is searching for excuses:
…we are always cautious when a large rise in employment coincides with a significant pop in the participation rate. Our analysis of the detailed data suggests that the rotated portion of the sample, ie households that were added to the survey this month, may have accounted for a large proportion (up to 90%) of the monthly increase in employment. That is, new households entering the survey for the first time were more attached to the labour force than existing participants in the survey and so boosted both the level of employment, and participation. In the past the ABS has noted that sample rotation can result in temporary shifts in the data that are not necessary indicative of a turning point or the start of a new trend.
And from ANZ:
A very strange labour force report. The number of employed was estimated to have risen by the largest amount since July 2000, pushing the participation rate sharply higher after a period of relatively stability. Nevertheless, the number of unemployed rose marginally and the unemployment rate was steady at 5.4% versus expectations of a small rise to 5.5%.
At face value, the employment numbers look very odd and we expect some significant pullback next month. Importantly, trend full-time employment contracted modestly in February with all the recent strength in jobs in part-time employment. While the ANZ job ads series had pointed to the risk of a stabilisation in the employment-to-population ratio in February (see chart below), the sharp jump in this ratio presumably reflects a fair degree of statistical noise. The employment-to-population ratio also bounced around substantially in early 2012.
Even Bloxo at HSBC, who is smelling sweet today, is cautious:
Employment jumped by a huge +71.5k jobs in February, surprising the market, which expected a rise of only +10k jobs. The unemployment rate was steady at +5.4%, as the participation rate rose by a sharp +0.3%. As always, the volatile monthly jobs numbers need to be read carefully, and the jump in jobs is likely to be overstated. Nonetheless, today’s labour survey does suggest that the labour market has probably passed its weakest point. We maintain our view that the unemployment rate will stay under 5.5% and will edge downwards in H213. We also maintain our non-consensus view that the RBA’s easing phase is done.
Markets are taking it seriously, though. The dollar has held its gains, bonds have been hammered, while the share market is also down, although this is probably more related to China and iron ore than any concerns about rate rises.
Nonetheless, interest rate cuts in the next 12 months are now all but erased:
