- Australia's unemployment rate held steady at 4.1% in September, on the back of stronger-then-expected employment growth.
- Over 64,000 Aussies landed jobs in September, surpassing the median market estimate.
- Participation rate hit a record high of 67.2%, reflecting labour supply and demand coming into balance.
- These figures came out stronger than many economists anticipated.
- Economists agree the strong employment growth removes any urgency for a near-term cash rate cut.
The latest labour force survey from the Australian Bureau of Statistics (ABS) revealed that the jobless rate stood firm at 4.1%, seasonally adjusted, in September, in line with the downwardly revised figure in the previous month.
More than 64,000 Aussies landed jobs, mostly in full-time roles, last month, exceeding the median market estimate of 25,000.
Over the past six months employment growth has averaged at around 45,000.
On the other hand, those looking for work fell by over 9,000 in September.
"With employment rising and the number of unemployed falling, the unemployment rate remained at 4.1%, where it has generally been over the past six months," said Bjorn Jarvis, ABS head of labour statistics.
The Thursday jobs report, along with previous prints, shows that Australia's unemployment rate is tracking near the RBA's estimate for a non‑accelerating inflation rate of unemployment (NAIRU) of 4.3% in Q4.
However, the risk of the jobless rate falling lower than RBA Governor Michele Bullock and her Board prefer could raise prospects of a cash rate hike amid growing expectations that the central bank's next move would be to cut.
Unemployment has a historically inverse relationship with inflation - when fewer people are looking for work, consumer prices tend to rise faster.
Despite the dovish shift in its tone, the RBA reiterated in its previous meeting that it intends to remain vigilant to risks that could impede its goal of hitting the inflation target of 2-3% by 2026.
"Inflation could be lower or higher. Unemployment could be lower or higher. So we need to be alert," Gov Bullock said in her latest post-meeting press conference in September.
"We need to be looking at the data, and we need to respond when we see things are maybe not turning out the way we think in either direction."
Zooming into the ABS data, it shows that while the number of unemployed fell slightly to 616,000 last month, the number of individuals looking for jobs has risen by around 90,000 since September 2023.
Despite the increase over the last year, the number of unemployed remains lower (by around 93,000) than pre-pandemic levels when the unemployment rate hit 5.2%.
Participation rate, employment-to-population ratio post new record
Helpfully for the RBA, the strong rise in employment saw the participation rate jump to a record high of 67.2%.
The participation rate measures the percentage of the population working or willing to work, thus the September jobs figures indicate a balancing of labour supply and demand.
The RBA Board, in its September meeting, noted that "the rise in participation rate reflected a combination of jobs being readily available and the effect of financial pressures from the higher cost of living".
This means more people may be forced to look for more work or return to the job market to address rising living expenses.
Additionally, the 3.1% annual increase in employment outpacing population growth of 2.5% has pulled up the employment-to-population ratio by 0.1 ppt in September and 0.4 ppt through the year.
This has brought the employment-to-population ratio to a new historical high of 64.4%, seasonally adjusted.
"The record employment-to-population ratio and participation rate shows that there are still large numbers of people entering the labour force and finding work in a range of industries, as job vacancies continue to remain above pre-pandemic levels," Mr Jarvis noted.
Monthly hours worked also inched higher, up by 0.3%, seasonally adjusted, last month, though slightly less than the 0.4% rise in employment.
Generally, this indicates that while more people are entering the labour market, they are not necessarily working more hours - such is the case when the underemployment rate increases.
However, underemployment was in fact down 0.1 ppt to 6.3% in September, while underutilisation rate plunged 0.2 ppt to 10.4%.
Full-time employment rose by 51,600, stronger than the increase in part-time roles of 12,500.
Trend data is in line with seasonally adjusted figures: 4.1% unemployment rate, 67.2% participation rate, and employment-to-population ratio at 64.4%.
Cash rate cut this year now a pipe dream?
The ongoing strength of the labour market is dousing the hope of borrowers for cash rate cuts this year.
"The various indicators of labour market tightness the RBA examines point to a still tight labour market, which means the RBA Board is unlikely to see any urgency to cut rates in the near term," said Adam Boyton, ANZ head of Australian economics.
ANZ economists, along with counterparts over at NAB and Westpac, expect the first easing of the monetary policy to commence in February 2025.
The outlier of the Big Four, CBA, which forecast a December 2024 start to rate cuts, also conceded that the strong jobs growth extinguishes the likelihood of a 25 basis point cut it expects.
"The recent labour market data does not strengthen the case for the RBA to commence normalising the cash rate this calendar year. Indeed at the margin, it weakens it," said Gareth Aird, CBA head of Australian economics.
"That means the conviction we have in our call for a 25bp December cut to the cash rate has dipped today."
Despite the risk firmly shifting to a later start date for the first reduction, Australia's largest bank has chosen to stick with its call.
Dr Aird pointed out that the Reserve Bank's current estimate of the NAIRU (non-inflationary rate of employment) is "clouded in a lot of uncertainty".
"Pre‑pandemic the unemployment rate at ~5.25% was too high. Wages growth was too weak and inflation was below target. But the cyclical trough in the unemployment rate post‑pandemic of 3.5% was too low to be consistent with the inflation target," he said.
Given this uncertainty, CBA expects Gov Bullock will look to the inflation and wages data, due on 30 October and 13 November, respectively, to better estimate the unemployment rate that is consistent with full employment.
"If inflation falls faster than anticipated, the labour market may not need to loosen much further," Dr Aird said.
Photo by Austin Distel on Unsplash
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