For a second consecutive month, Australian job creation has stunned financial markets, setting a raft of records in the process.
Employment increased by 71,400, the most since July 2000. When combined with October’s 56,100 gain, employment over the past two months has grown by 127,500, the most since January 1988.
Over the past year employment increased by 344,200, the largest increase since January 2008. In percentage terms, that equates to 2.97%, the fastest acceleration since June 2008.
Despite a sharp lift in the number of people in the labour market, the unemployment rate dropped to 5.8%, the lowest level since November 2013.
The list could easily go on.
Now that the event has come and gone, it’s time to see what Australia’s economic community think of the stellar, if not questionable, level of job creation.
Michael Workman, CBA
Believe it or not, again!
There will be many doubters over the accuracy of the ABS series, but a trend improvement in the jobs data does correspond with the leading indicators like the business and vacancies surveys. It is unusual to have two strong consecutive rises. But it has happened regularly in the past when the labour market turns.
The economy is restructuring and rebalancing, which involves ongoing highly publicised job losses. But there are also job gains underway. And they are advertised. That is why the job vacancies series have been rising steadily over the past year. The bond markets might not like it but there is solid jobs growth occurring and, most probably, the unemployment rate peaked in early 2015.
Justin Fabo, ANZ
The strong labour force reports for both October and November are clouded by the ABS’ admission that the rotation of the labour force survey significantly contributed to the very strong jobs outcomes in those months. Indeed, measured jobs growth of 3% y/y looks to have run noticeably ahead of the signal from other labour market indicators.
The modest improvement in the unemployment rate, however, appears to be broadly consistent with the improving trend in job ads which have been indicating a risk of a lower unemployment rate for some time. Overall labour underutilisation, however, remains substantial despite some improvement.
Clearly the RBA will be happy with the improvement in labour market conditions, even after heavily discounting the recent strength in the official figures. Nevertheless, we stand by our call for 50bps of cash rate cuts next year.
Tapas Strickland, NAB
We need to treat these numbers with extreme caution and almost certainly employment growth has not been this strong. The ABS surveys 26,000 households who are meant to represent all of Australia and it seems that the rotation in the sample (one-eighth is rotated each month) drove 64,000 of the increase in the month. Excluding sample rotation, jobs growth was a more modest 5,300 in the month.
For the RBA, they are likely to interpret the jobs figures through the lens of the past couple of months. On this basis, the unemployment rate has trended lower, and is sitting well below where they had forecast at the beginning of November. Combined with other indicators of the labour market, this data should strengthen their views of the non-mining economy picking up and should add to the argument of the RBA being on hold. NAB continues to expect the RBA to remain on hold for an extended period, before modest rate increases from mid-2017.
Chris Caton, BT Financial Group
The second humongous rise in employment and the second successive fall in unemployment should effectively rout all those calling for further rate cuts. Some will question the veracity of the data, of course. They always do.
Yet another puzzling employment report, exhibiting strength that few are prepared to accept at face value. Nevertheless, it can’t be discounted completely. Until there is clear evidence to the contrary, the case for a further rate cut has evaporated.
Scott Haslem, UBS
November’s labour report delivered a near record high growth in jobs and a drop in unemployment. But this overstates the ‘true’ improvement, with the trend in the pace of the matched sample broadly consistent with 2% y/y jobs growth (20,000 pm over 4 months) – which is in line with the leading jobs indicators – rather than the reported 3% pace. That said, this is still fast enough to suggest the peak in the unemployment rate has already passed, consistent with our view the RBA will remain on hold over the next year.
Paul Bloxham, HSBC Australia
It is hard to know what to make of today’s official labour force numbers. Taken literally, they suggest that the economy is no less than booming.
However, we know that the official labour force survey has had significant measurement issues in recent times and this month the survey was also subject to a sample rotation, which may have added to these problems.
We suspect that the RBA will also discount the official numbers to a large degree, given the measurement issues. Nonetheless, general trends are positive and support the RBA’s current stance of waiting and watching. We have an RBA cut pencilled in for Q1 2016, but acknowledge that if the much stronger labour market numbers prove to be a sustained and statistically robust trend, further cuts would be unlikely.
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