Australian employment data is here: Australia – Employment Change: +37.4K (vs. expected 5.0K)

Economist responses:

UBS economist Scott Haslem:

  • Today’s labour market data was clearly much better than expected (again), with a welcome lift in jobs growth to a near 4-year high of 1.9% y/y
  • to finally be more consistent with the leading indicators of employment, which we have long flagged as pointing to an imminent pick-up
  • Dragged unemployment to 6.1% (after a 12-year high)
  • Elsewhere, housing activity is booming with record commencements in Q3; but non-resi construction is collapsing
  • Overall, we still expect the RBA to hold in 2015

Westpac:

  • Stepping back from the monthly volatility, the three month average change in total employment was +33k in Dec, +15.1k in Nov and –2.4k in Oct.
  • As 2014 ended there was an uptick in employment growth which is reflected in the lifting of the annual pace of employment growth to 1.9%yr
  • Total employment lifted 213.9k through 2014
  • The leading indicators had been suggesting that total employment growth should be around 1½%yr by year end with a further modest acceleration up to 2.0%yr in early 2015. We have now seen this lift, and while it is possible for employment growth to overshoot the leading indicator in the short-run, during the last few months the employment indicators in the various business surveys have dipped below their long run average suggesting that the bump up in the pace of employment growth may prove to be fleeting
  • The breakdown of the survey details highlights broad based strength in the labour market
  • The only reason there was not a larger fall in unemployment was that the rise in participation was actually very marginal, at two decimal places the participation rate was almost flat at 64.75% compared to 64.74% in Nov.
  • The unemployment rate ended the year only marginally higher than where it ended 2013, 6.1% vs. 5.9% while the participation rate was marginally higher, 64.75% vs. 64.57% in Dec 2013
  • But in a significant deviation from the positive tone, hours worked fell 0.5% in Dec, following a 0.3% decline in Nov which saw the annual pace ease back to 0.3%yr from 1.3% in Nov.

HSBC chief economist Paul Bloxham:

  • The strength in the official numbers suggests that the official survey is now starting to look more like the other indicators of labour market conditions, such as job advertisements and business surveys, which have been more positive for some time now
  • In recent months, we have argued that the other indicators were a better guide to labour market conditions than the official survey, given measurement issues
  • We continue to believe that the unemployment rate is close to, or past, its peak
  • We still expect that the RBA’s easing phase is done

ANZ economist Riki Polygenis:

  • Despite today’s figures and as published earlier this morning, ANZ Research expects some further deterioration in the unemployment rate over 2015 to a peak of 6.6% in Q2, in response to softer domestic growth outcomes and expectations
  • While indicators of new labour demand have been increasing moderately, this is unlikely to be strong enough to counteract the flow of new workers into the economy and job losses in certain sectors
  • Today’s figures should be characterised as a pause on the gradual uptrend
  • For the RBA, today’s figures are encouraging. However the reality remains that the recovery in the non-mining economy has been slower to eventuate than expected and the sharp fall in energy prices creates more space for the inflation-targeting central bank to support the domestic economy
  • Our new forecasts as published this morning see the RBA lowering the cash rate to 2.0% by mid-2015

CBA:

  • Leading indicators of employment are continuing t show a positive trend and we expect reasonable jobs growth over the period ahead

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