Unemployment rises despite another surprise job creation surge
Australia’s unemployment rate has increased to 3.9 per cent despite the creation of more than 60,000 jobs last month, as the participation rate surged to a fresh record high.
Key points:
- Unemployment climbs to 3.9pc, its highest level since May 2022
- The proportion of Australians aged 15 and over in work or looking for it is at a record high of 67.2 pc
- Financial markets expect the RBA to start cutting interest rates by June 2024
Because 67.2 per cent of Australians aged 15 and over are now either in work or actively looking for it, up from 67 per cent in October, the estimated 61,500 jobs created in November were not enough to keep the jobless rate steady at 3.8 per cent.
Underemployment also rose 0.2 percentage points to 6.5 per cent, which is 0.7 percentage points up on the low point from November last year, but 2.2 percentage points below where it was at the start of the pandemic.
“The recent slowdown in hours worked over the past six months continued into November, with the total number of hours worked now around where it had been back in May. However, this follows very strong growth during late 2022 and early 2023,” ABS head of labour statistics Bjorn Jarvis said.
“The slowing in hours means that overall growth rates in employment and hours worked are now similar over the past 18 months. The narrowing gap between these two growth rates suggests that the labour market is now less tight than it has been.”
The Bureau of Statistics estimates that 14.26 million Australians are now in work, leaving the employment to population ratio at an equal record high of 64.6 per cent.
The Asia-Pacific economist of jobs website Indeed, Callam Pickering, said it’s likely more people are looking for work due to surging taxes, consumer prices, rents and mortgage repayments.
“Australia’s cost-of-living crisis may have contributed to rising participation in the near-term, with many households needing to find more work to keep their heads above water,” he noted.
Mr Pickering said those pressures are unlikely to ease quickly, even as wage rises start to edge above inflation.
“We anticipate that those cracks will become increasingly obvious over the first half of next year,” he said.
“There are genuine concerns around the household sector and their ability to absorb the impact of cost-of-living pressures.”
Unemployment tipped to ‘rise well above 4pc’ early next year
Despite this, Marcel Thieliant from Capital Economics said the economy is struggling to absorb the surge in people wanting a job, both from new migrants and more people in the existing population looking for work.
“The 80,200 jump in the labour force was the largest since the end of 2021’s Delta lockdowns and over the past three months, the labour force has expanded by 47,000 per month,” he noted.
“One reason is that the surge in net migration is resulting in the adult population rising by nearly 50,000 per month. The other is that the participation rate jumped from 67.0 per cent to a fresh record high of 67.2 per cent.”
Mr Thieliant is concerned that this pace of job creation will not be sustained.
“Business surveys point to employment rising by around 20,000-30,000 per month, but that wouldn’t be enough to prevent the labour market from loosening,” he warned.
“Indeed, the continued decline in job vacancies suggests that the unemployment rate will rise to well above 4 per cent by early-2024.
“The Reserve Bank of Australia only expects unemployment to get this high by mid-2025, and we think that a more pronounced deterioration in the labour market will convince it to cut interest rates earlier than most anticipate.”
Most economists are forecasting the first cut in the RBA’s cash rate to take place over the last three or four months of 2024, however Mr Thieliant expects in to happen before the end of June and financial markets agree.
“Before the jobs release and following this morning’s dovish FOMC [Federal Open Market Committee], the Australian interest rate market was looking for a first 25-basis-point rate cut from the RBA in June 2024, with a second 25-basis-point rate cut fully priced by November 2024,” wrote IG’s Tony Sycamore.
“We don’t see today’s jobs numbers causing a drastic repricing of those expectations.”
Economists were generally expecting unemployment to tick up to 3.8 per cent (October’s jobless rate was originally reported as 3.7 per cent, before being revised up this month) with 11,000 jobs created in some payback for October’s surprisingly strong jobs gains.
