The National Australia Bank’s January business survey delivered the news many Australians wanted to hear — that the economy appears to be strengthening after a slowdown in the middle of 2016.
Even forgiving concerns surrounding the impact of the timing of the Lunar New Year holiday, and whether the positive momentum can last, it was still a solid result, hinting the recovery seen in other major advanced economies late last year is now starting to be felt Downunder.
And, perhaps most pleasing of all, the survey’s employment measure improved rapidly, pointing to the likelihood of a pickup in hiring in early 2017.
It rose 5 points to +7, the highest level that’s it’s been since 2011.
If sustained beyond the short-term, the NAB says employment growth is likely to not only pickup, but grow strongly.
Here’s a snippet from the NAB report explaining why:
Employment conditions were bolstered by the improvement in trading conditions over January, once again pointing to better labour market outcomes than those seen in the ABS labour force survey of late. The employment index jumped by 5 points in the month to +7 index points, which is above the long-run average for the series. This outcome points to an annual job creation rate of around 240,000 (around 20,000 per month) in coming months, which is sufficient to see the unemployment rate ebb lower (all else unchanged).
While this is just one reading — and an anomaly to those in recent years — it fits with other recent labour market indicators that suggest conditions are firming once again.
According to data released by the ANZ earlier this month, Australian job advertisements surged by 4% to 167,164 in January, more than reversing a 2.2% drop in December.
It was the largest monthly increase since September 2015, a period that just happened to coincide with strong labour market hiring in the latter parts of that year.
And, even forgiving the wild monthly swings in the ABS’ seasonally adjusted jobs data, full time hiring picked up at the end of 2016, again hinting that employment conditions are improving.
So while caution towards the NAB survey is still warranted, the strength reported in January is not isolated when looking at other labour market indicators.
Markets will get further clarity on the subject later in the week with the ABS due to release Australia’s January jobs report on Thursday, February 16.
Of the 25 economists polled by Bloomberg, individual forecasts range from a drop in employment of 11,000 to an increase of 28,000.
The median forecast is centered upon a modest gain of 10,000, leaving the unemployment rate steady at 5.8%.