Australian jobs rebounded in August following a surprise drop while the unemployment rate held steady, suggesting the labor market is managing to cope with the Reserve Bank’s 12 interest-rate increases.
(Bloomberg) — Australian jobs rebounded in August following a surprise drop while the unemployment rate held steady, suggesting the labor market is managing to cope with the Reserve Bank’s 12 interest-rate increases.
The economy added 64,900 roles from the prior month — driven primarily by part-time jobs — compared with estimates for a 25,000 gain, Australian Bureau of Statistics data showed Thursday. The jobless rate held at 3.7% as the labor force swelled, having hovered in a range of 3.4%-3.7% since June last year.
The Australian dollar hit a nine-day high of 64.53 US cents immediately after the data, which bolstered the case for the RBA to hike one more time given inflation remains elevated and the labor market is still tight. Incoming Governor Michele Bullock has warned policy decisions will be a month-by-month prospect until at least next year.
The currency’s gains were short-lived as the market focused on the details of the report, which showed an increase in underemployment, suggesting a bit more slack in the labor market than the headline numbers indicated.
“The vast bulk of jobs growth being part‑time, and hours worked falling in the month takes the gloss off the impressive headline jobs print,” said Adam Boyton, head of Australian economics for ANZ Bank, who sees the RBA on an extended pause. “The labor market is still very solid but slack is creeping in.”
The RBA held rates at 4.1% for a third straight month in September and economists and money markets are divided on the policy outlook. The former expect one more hike to 4.35% in November, while traders are suggesting rates have now peaked as inflation looks to be moving back toward the RBA’s 2-3% target.
What Bloomberg Economics Says…
“The bottom line is the labor market continues to show signs of accumulating slack. Unemployment has trended higher since the second half of 2022 and underemployment is also grinding higher. That’s set to continue.”
— James McIntyre, economist
To read full note, click here
Thursday’s figures showed that annual jobs growth eased to 3% from 3.1% at the start of the year. Economists expect the pace of employment gains to slow further with the jobless rate seen hitting 4.5% next year.
Economists say there’s a risk that the labor market remains tight. ANZ’s proprietary labor market indicator is now flagging only a “very slow trend drift higher” in the unemployment rate, Boyton said, citing recent increases in job advertisements and a lift in forward orders in a National Australia Bank Ltd. business survey.
“A further small improvement across these indicators would point to the unemployment rate moving sideways, and not rising,” he added.
Thursday’s labor data also showed:
- The participation rate climbed to 67%
- Underemployment rose to 6.6% from 6.4% a month before and under-utilization also advanced
- Full-time roles increased by 2,800, while part-time spiked by 62,100
- The employment to population ratio climbed to 64.5%
The figures further support expectations Australia will avoid the type of wage-price spiral seen in many developed economies, with annual pay gains currently at 3.6% and expected to peak at around 4%.
“The most notable indicator is all-time highs on the participation rate and this indicates flexibility in the labor market that should moderate wage demands,” said Dwyfor Evans, Head of APAC Macro Strategy at State Street Global Markets. “There is little here to move the dial for the Reserve Bank.”
–With assistance from Tomoko Sato and Michael G. Wilson.
(Adds comments from Bloomberg Economics in seventh paragraph.)
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