Investing.com-- Australia’s labor market unexpectedly shrank in December with the participation rate falling from record highs, although low unemployment and relatively high participation still pointed to resilience in the sector.
The total number of employed people fell by 65,100, data from the Australian Bureau of Statistics showed on Thursday. The figure was weaker than expectations for a rise of 17,600 people, and largely reversed a 61,500 jump seen in the prior month.
The participation rate- ie the percentage of the working age population that is in the workforce or seeking work- sank to 66.8% from a record-high 67.2% in the prior month, while unemployment remained steady at 3.9%. Unemployment remained close to lows last seen nearly 50 years ago.
December’s drop in employment came after two strong months of growth, as demand for skilled labor remained high.
The annual growth rate in hours worked continued to slow in December, suggesting some cooling in the labor space. But the ABS noted that Australia’s jobs market still remained relatively tight, with December’s data showing that employment increased by an average of 32,000 people per month in 2023.
"Both the unemployment and underemployment rates remained relatively low and the participation rate and employment-to-population ratio relatively high, suggesting that the labour market remains tight," David Taylor, ABS head of labor statistics said in a note.
A strong labor market is one of the factors considered by the Reserve Bank of Australia in raising interest rates, given that high employment and steady wage growth were a key driver of inflation over the past two years.
Still, with recent data pointing to a decline in inflation in November, the RBA is widely expected to keep rates on hold when it meets in February. But inflation remains above the central bank’s 2% to 3% annual target.
The Reserve Bank has forecast an eventual cooling in the labor space, and is expected to keep rates higher for longer in order to bring down inflation.
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