Australia's employment growth heading for another 4½-year record

Employment growth in Australia measured by the year-on-year rate has been on a rising trend since January 2014, and this trend is expected to have extended to October and a rate of 2.2%. At this level, employment growth is well above the recently downgraded rate of population growth (of working age) of 1.5%, and hence consistent with declining unemployment; provided that participation does not rise too quickly. 

Broadly speaking, employment conditions are likely to have remained solid at the start of Q4, given the continuing rebalancing of growth away from resource investment towards the more labour-intensive sectors of residential construction and services exports. Business sentiment has also been quite firm, with improving employment indications. Moreover, though employment growth in Q3 was strong (1.8% qoq saar), the gains came at the start of the quarter and in September the survey reported a small decline. In other words, October's labour market report should benefit from a statistical rebound. 

Although the participation rate is expected to recover part of September's 0.15pp decline, a 20k employment gain should be sufficient to allow a marginal decline in unemployment, given that at current rates of participation the demographic increase in the labour force is around 15k per month. And as the unemployment rate was a very close to the rounding point in September (6.16%), a decline to 6.1% is expected. This would strengthen perceptions that unemployment in Australia has peaked.