Australia’s economy added 76,000 jobs last month as employers defied signs of slowing demand to expand the national workforce beyond 14 million for the first time.
The jobless rate in May was 3.6%, down from 3.7% in April, the Australian Bureau of Statistics reported on Thursday. Economists had expected the economy would add 17,500 positions last month, leaving the unemployment rate steady at 3.7%.
The treasurer, Jim Chalmers, said the May figures were “a remarkable achievement” and brought the number of jobs added in the Albanese government’s first 12 months to 465,00o. That tally was six times that of the first year of the Howard and Abbott governments.
“We still expect unemployment to tick up over time,” Chalmers said, adding that Australia entered “this period of significant global economic uncertainty from a position of relative strength”.
The jobs data will be closely watched by the Reserve Bank of Australia ahead of its 4 July meeting to decide whether to lift the official interest rate a 13th time in 14 months, or follow its US counterpart and pause its hikes.
The RBA governor, Philip Lowe, said in a speech earlier this month Australia was enjoying “a once-in-a-generation improvement in the Australian labour market” but the central bank would give priority to reining-in price pressures. Most economists predict the jobless rate will rise as households and firms cut spending.
“I want to make it clear, though, that the desire to preserve the gains in the labour market does not mean that the [RBA] board will tolerate higher inflation persisting,” he said.
Markets interpreted the labour force figures as increasing the odds the RBA will increase the cash rate again. The Australian dollar perked up, gaining half a US cent by late afternoon. Stocks initially erased early gains but later rebounded to end trading up 0.2% for the day.
Prior to today’s jobs data, investors were rating the odds of a July Reserve Bank rate rise as a one-in-four chance.
Australia's jobless rate in May fell to 3.6% even as the participation rate reached a record 66.9%.
— @phannam@mastodon.green (@p_hannam) June 15, 2023
(Source: @ABSStats ) pic.twitter.com/s0sepUBEH0
The drop in the unemployment rate came even as the participation rate rose to a record 66.9%, meaning more people were looking for work.
One less bullish number, though, was the total number of hours worked, which fell 1.8% for the month but remained 4.8% higher than a year earlier.
The ABS head of labour statistics, Bjorn Jarvis, said the employment increases averaged out to around 36,000 extra employed people in the past two months. “This is still around the average over the past year of 39,000 people a month.”
Jarvis said women’s participation rate increased 0.2 percentage point to 62.7%, and remained at 71.2% for men.
“A greater share of women in Australia are employed than ever before, with their employment to population ratio and participation rate both at record highs in May,” he said.
Australia’s workforce was about 13 million going into the Covid pandemic, during which time it retreated to 12.1 million. Since the nadir, the economy has added almost 2 million jobs.
New South Wales and Victoria account for about half of the national economy and last month generated about 82,000 extra jobs roughly split between them.
The number of Australians in work passed 14m for the first time in May, up almost 2m from the depths of the Covid recession. (Source: @ABSStats ) pic.twitter.com/MEellRjypK
— @phannam@mastodon.green (@p_hannam) June 15, 2023
The jobs jump sent NSW’s jobless rate down to 3%, the lowest in the nation, from 3.4% in April. Victoria’s rate eased to 3.7% from 3.9%.
CBA’s chief Australian economist, Gareth Aird, said the “very strong set of labour force numbers look inconsistent with other economic data”.
The labour market was “loosening” – but not via the traditional mechanism of an increase in the jobless rate – as more workers looking for extra hours.
“In time the unemployment rate will lift given below‑trend economic growth,” Aird said. “But it is simply just taking more time than would be expected given the slowdown in the economy.”
CBA currently puts the chances of a July RBA rate rise as 50:50, with the May inflation figures on 28 June likely to firm up forecasts.
ANZ, meanwhile, said a July rate hike was now more likely than not, with another to follow in August. That would bring the cash rate to 4.6%, the highest since late 2011.
The head of macroeconomic forecasting for Oxford Economics Australia, Sean Langcake, said April’s rise in the jobless rate to 3.7% now looks like a “wobble”.
“The RBA has maintained a hawkish tone following the June rate rise, expressing concerns over the persistence of underlying inflation,” Langcake said. “These data will do nothing to allay those concerns.”
He predicted two more RBA rate rises to lift the cash rate to 4.6% before a “protracted pause” before a rate cut.
