Australia markets closed

Cracks are emerging in the Australian jobs market, which just had its biggest fall in three years

Jack Derwin
  • Having managed to bat on for much of 2019, the Australian labour market is starting to look exposed, after 19,000 jobs were lost in the month of October, according to the latest data.
  • It saw the unemployment rate tick up to 5.3% and marked the first net negative month of 2019.
  • All that could panic the Reserve Bank of Australia (RBA), with AMP Capital chief economist Shane Oliver believing it could cut rates in December, and potentially look to QE to fill the cracks.

The labour market has taken a real turn.

In October, for the first time this year, there were actually less jobs than the month prior. 19,000 fewer to be exact, despite expectations to the contrary, and it's enough to see the unemployment rate rise to a new high, according to the latest data.

"The unemployment rate drifted back up to 5.3%, rates of underutilisation pushed higher, and monthly employment experienced its biggest fall in over three years," Indeed Asia Pacific economist Callam Pickering said in a note issued to Business Insider Australia.

"Throughout 2019 the Australian labour market has held up surprisingly well given soft economic growth and a lack of demand across the domestic economy. The cracks though are beginning to be felt."

It's at stark contrast with the trend this year, which has seen job creation remain strong and tens of thousands of jobs added to the economy. Such growth had been unable to put any kind of meaningful dent in the unemployment rate, however, as the proportion of Australians looking for work – the participation rate – flirts with record highs.

While it eased slightly in October, Thursday's read of October's figures is that there are more than two millions Australians unemployed or underemployed and a shrinking pool of jobs. The ones that have been created also haven't been the quality full-time positions the country needs, as the casualisation of the workforce takes hold.

"Full-time opportunities have accounted for just 54% of employment growth over the past year. That’s well below the level of full-time job creation in 2017 and 2018. The Australian economy has created a lot of jobs this year but not the high-quality roles that were created in the past. That is a common feature of a soft economy and a trend that should persist into early next year," Pickering said.

Looking ahead, BIS Oxford Economics chief economist Sarah Hunter said there's no real indication October's weakness will become the new normal.

"While the forward indicators aren’t suggesting that we’ll see sustained declines, it does indicate that slower growth in employment is likely to materialise over the near term; unsurprising, given the residential construction downturn and the ongoing weakness in the retail sector," she said in a note issued to Business Insider.

"The decline was matched against a rise in the unemployment rate – to 5.3% – and a fall in the participation rate – to 66% – indicating that slack in the labour force is now captured in both measures. And with the underemployment rate also rising, to 8.5%, the data clearly confirms that there is plenty of slack in the economy."

Victoria and New South Wales – the nation's most reliable job engines – are still leading the pack but New South Wales appears to be faltering somewhat. There were 10,300 fewer jobs available in October than the month prior.

Job ads accordingly were down nearly 8% according to job site Seek, with advertised salaries rising 2% higher compared to last year. It's a long-running trend, and one that shows little sign of abating.

With healthcare and social services the only sector in the country to be currently enjoying healthy wage growth, it's unsurprising to see demand for workers jump. Demand for community services and development workers surged 16.7%, and healthcare more than 5% – as did the education and training sector.

“Frontline social services continue to make the greatest contribution to job ad growth across Australia with Healthcare, Community Services and Education & Training the top-performing sectors," Seek Australia and New Zealand managing director Kendra Banks said in a note.

"In healthcare, there is a strong demand for aged care nurses; across the community services sector, there is a great demand for aged & disability support workers. Secondary school teachers remain in high demand."

It's sure to raise the hackles of the Reserve Bank of Australia (RBA), strengthening the case for another rate cut sooner rather than later. While the consensus is early 2020, others like AMP Capital chief economist Shane Oliver believes it could pull the trigger as early as next month with a QE program to boot.