Why the latest jobs data is making everyone happy

The latest jobs data has surpised economists with greater improvements than predicted. Let’s take a look at the December 2020 labour report.
The post Why the latest jobs data is making everyone happy appeared first on The Motley Fool Australia. –

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A better than expected unemployment rate is the big takeaway from the December 2020 jobs data.

Released by the Australian Bureau of Statistics (ABS) yesterday, the data shows the jobless rate for December was 6.6%. This is down from 6.8% in November last year.

General feedback from market analysts is that the latest jobs data is positive and the improvements imply that the economy is recovering more quickly than initially expected.

Let’s take a closer look at information included in the report, and what people have been saying about it.

The labour participation rate

The Reserve Bank of Australia (RBA) notes the relevance of the labour participation rate as an important economic indicator, in addition to the unemployment rate.

The ABS data shows the labour participation rate for December 2020 came in at 62.1%. That’s a record, as pointed out on the front page of today’s Australian by economic editor Adam Creighton.

What does it mean?

When the participation rate moves around, it’s not as straight forward as the jobless number. While unemployment measures the number of people who are not working in paid employment, the participation rate endeavours to look closer into why.

Tracking the fluctuations of the labour participation rate can offer deeper insight into the reasons why people may choose not to participate in the job force. 

The RBA further mentions that the job participation rate can be impacted by a number of factors. These include job seekers becoming discouraged so they quit searching, people who have been laid off with significant redundancy packages, or young people who elect education pursuits opposed to a regular job.

Experts consider a record high workforce participation rate as a good sign of a strong economy.

Educated guesses, forecasts and hype

Part of what makes today’s unemployment numbers so welcome is the comparison of real data to forecasts that have turned out to be incorrect.

According the Australian, economic conditions are improving faster than the RBA had predicted, which in turn can impact current quantitative easing decisions. 

The dominos effect that labour force data can have on the rest of the economy is what makes it a valuable indicator. The in-between area of forecasts produced by economists paired with what actually takes place in a month can offer unique insights about the financial health of the country.

Any closing thoughts from the analysts?

UBS chief economist George Tharenou said that the falling unemployment number “edges up our already above-consensus GDP forecast for 2021 to 4.3% year-on-year”.

Analysts seem to agree that the latest jobs numbers signify a strong, resilient economy that is rebounding from COVID-19 faster than anticipated, for now.

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Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the latest jobs data is making everyone happy appeared first on The Motley Fool Australia.

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