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Hidden detail in strong job figures

JOBLESS FIGURES
Fresh jobs figures were released by the Australian Bureau of Statistics on Thursday. Picture: NCA NewsWire/ David Crosling

Australia’s labour market continued to display remarkable resilience last month with the economy adding 39,700 jobs, even as GDP growth remains anaemic.

The boost in new jobs helped push the unemployment rate to 4 per cent in May, the Australian Bureau of Statistics reported on Thursday, a result in line with consensus forecasts.

Economists have been anticipating the jobs market to gradually cool due to steeply higher interest rates and stubbornly persistent inflation, however monthly employment data has continued to defy expectations of a slowdown in jobs growth.

Despite May’s strong reading, the job figures are unlikely to affect the timing of rate cuts by the Reserve Bank, which investors are not expecting to fall from their current level of 4.35 per cent until May next year.

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“With services inflation still running hot, we think the RBA will want to see more evidence that employment is reaching sustainable levels before it contemplates a policy pivot,” Abhijit Surya from Capital Economics said.

Last month’s result was driven by an increase in full-time jobs, rising by 41,700, which was partly offset by a decline in part-time positions, down 2100. The number of unemployed people dropped by 9200.

Also indicating strength in the monthly jobs report was the participation rate – measuring the share of the working aged population in work or looking for work – which held at 66.8 per cent, just 0.2 percentage points below its record.

The underemployment employment rate, a metric for the proportion of workers in a job but looking for additional hours, was also steady at 6.7 per cent.

By historical standards, the jobs market remains exceptionally strong and has given little sign of sharply deteriorating in the future.

Hiring intentions and jobs ads, a leading indicator of jobs growth, have also remained robust despite easing from their extremes spurred on by pandemic-era labour shortages.

May’s jobless reading represents a slight decline from April’s result when the unemployment rate rose to 4.1 per cent – its equal highest level since January 2022.

However, the ABS said this was due to an unusually large number of people waiting to start work, inflating April’s jobless reading while helping to drive May’s result lower.

“In April we saw more unemployed people than usual waiting to start work,” Bjorn Jarvis, the ABS’ head of labour statistics said.

“Some of the fall in unemployment and rise in employment in May reflects these people starting or returning to their jobs.”

The one caveat to the otherwise strong jobs report was a decline in hours worked, which slipped 0.5 per cent in May.

“Historically, after the economy slows, the labour market adjusts more via weaker hours worked, rather than outright jobs losses, and this broad trend appears largely to be repeating,” UBS chief economist George Tharenou said.

“That said, if weakness broadened into employment, then the labour market would approach ‘RBA rate cut territory’.”

Treasurer Jim Chalmers said the jobs market was proving to be an important source of strength at a time when household budgets were under pressure.

“Despite our economy weakening substantially as a result of higher interest rates, persistent inflation and ongoing global uncertainty, our labour market remains resilient and that’s clear from today’s result,” Dr Chalmers said.

The unemployment figures continues to track below the RBA’s own staff forecasts, which project the jobless rate will rise to 4.2 per cent by the middle of the year, and climb towards 4.3 per cent by year’s end.

Despite the robust headline result, AMP economist Diana Mousina said there were signs that the rate of new job creation was slowing.

“Conditions are not quite as strong as they were in late 2022,” Ms Mousina said, adding that annual jobs growth was now running at 2.5 per cent, below the roughly 3 per cent rate in late 2023.

Separate data released on Thursday showed net overseas migration, the difference between the number of international arrivals staying in Australia for longer than 12 months, and the number of long-term and permanent departures, was 547,267 last year, down from a record of 564,645 in the 12 months to September 2023.

The reading is likely to reignite Coalition criticism against Labor, with the Opposition claiming the Albanese government has overseen a migration surge while failing to bolster the supply of housing and infrastructure.

Economists calculate approximately 38,000 new jobs needed to be created every month top hold the unemployment and participation rates stable granted surging population growth.