The headline to Westpac’s comments on the employment report are nice …

  • “Largest monthly gain in total employment in history of this survey under the current economic conditions? Really?”

More:

  • Total employment … largest monthly rise … since Feb 1978, which is the start of the survey
  • Acceleration of the annual growth pace from 0.9%yr to 2.2%yr, the fastest pace since April 2011
  • Other detail is more circumspect and in fact quite confusing
  • More confusing was the flat print on hours worked. Really? Employers added 121k workers and yet there was no lift in total hours worked? So everyone, on average, worked less this month than they did last month? Why? It does not make any sense.
  • Going back to the previous largest surges in employment, we do find something interesting. In Aug 1991, employment rose 102.6k but hours worked fell 0.3%mth. In Jan 1988, employment rose 88k but hours worked fell 0.2%mth. In both cases, employment then fell in the following month, –31.3k in Sep 1991 and –16.9k in Feb 1988. So should we bank on a negative for Sep 2014? It is not clear cut. If you just look at months where employment grew by more than 60k then you get a much more mixed picture on hours worked and the following monthly print for employment. Also the gross flows data is consistent with a robust underlying employment number. There was a solid improvement in the matched portion of the sample but we do note that it was aided by the rotating portion.
  • More importantly, the hiring rate was very strong – highest since 1994 – and the separation rate was the lowest in 3yrs although ‘involuntary’ separation rate flattened rather than declined
  • Our Jobs Index is still pointing to sound employment growth of around 1½%yr at best, nowhere near the August print of 2.2%yr
  • Our forecast will incorporate some correction to get the pace back down, but it is very unclear how this track will actually pan out

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It pretty much looks like today’s report has cleared up the outlook for the Aussie economy … if mud was clear, that is.

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More on today’s report: