Australia’s Jobs Slip Points to Cooling, Not Crashing, Labour Market

Based​‍​‌‍​‍‌​‍​‌‍​‍‌ on the seasonally adjusted figures, employment dropped by around 21,000 to 23,000. It was the most significant monthly fall in about nine months and a considerable deviation from the expected 20,000 increase. The unemployment rate, however, was maintained at 4.3%, which is slightly better than the predicted 4.4%, as the participation rate decreased to 66.7% from 66.9%, indicating a smaller total labour force.

While the numbers superficially show an increase in underutilization rather than a direct increase in unemployment. The figure for full-time employment is estimated to have decreased by approximately 55,000 to 57,000. The part-time jobs have increased slightly, thus the companies are reducing the working hours and the quality of jobs in their hours rather than firing the workers. The underemployment rate increased from 5.7% to 6.2%, and the annual employment growth rate is only around 1.3%, which is now less than the population growth rate of about 2%, thus signalling a gradual loosening of the labour market from very tight conditions.

The data is in general agreement with the Reserve Bank of Australia’s (RBA) view that slow economic growth will result in increased spare capacity and thus help to bring down inflation. This report slightly alleviates the need for a further tightening of the RBA in the near term, thus signaling that the interest rates might stay at their "higher for longer" level rather than a quick cut. For markets, the combination of negative employment growth, higher underemployment, and unchanged jobless rate at 4.3% is slightly dovish for short-term yields and the AUD, but the labour market is not weak enough to expect rate cuts in the immediate future ​‍​‌‍​‍‌​‍​‌‍​‍‌yet.