The January business surveys have started 2017 on a very positive note for the labour market with Westpac’s Jobs Index jumping to 52.3, the highest level in this index since GFC (last reading this high was May 2008). Our analysis suggests that the current level of the Index is normally associated with employment growth of around 2%yr; in the December Labour Force Survey it was 0.8%yr.
Turning to the January Labour Force Survey (due to be released on Thursday, 16th of February) Westpac is forecasting a 20k rise in employment. The market median is 10k with a range from –11k to +28k. This will lift the pace of employment growth to around 1.0%yr, still well under our Job Index of around 2%yr but is a meaningful recovery none the less.
Holding the participation rate flat, it surged 0.3ppts in the previous two months, would see the unemployment rate dip 0.1ppt to 5.7%.
If you’re wondering about that remarkable dislocation over the past year then I’d put it down to a few things:
the ABS numberwang episode that way over-estimated growth in 2015 then gave it all back last year;
the election
all of these survey’s under-weighting mining.
That said, a modest recovery appears in the offing in the next six months.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
