Australia’s jobs market showed little signs of slowing in March despite almost a year of interest rate hikes, sparking fresh warnings from economists that the Reserve Bank will return to raising mortgage bills.
An estimated 53,000 jobs were added to the economy in March, ABS data published on Thursday revealed, with the unemployment rate staying near a 50-year low at 3.5 per cent.
The surge in employment surprised many economists, who said the jobs market remains extremely tight despite signs that almost a year’s worth of rate hikes are now putting family budgets under pressure.
“The jobs keep on coming,” EY chief economist Cherelle Murphy said.
“And so could higher rates.”
‘Stronger wages and prices’
The Reserve Bank has been waiting for signs that the jobs market is cooling before its next meeting in May after it decided to pause in April to wait for more data on the economy.
But with few signs the labour market is weakening a “pretty strong” March-quarter inflation reading now looms, BIS Oxford head of macro-economic forecasting Sean Langcake said.
“There’s nothing in [the jobs market data] that says we should expect core inflation to tail off in Q1 [the March quarter],” Mr Langcake said.
“It can only lead to stronger wages and prices.”
Headline inflation is still tipped to fall from December-quarter peaks, but at the heart of RBA fears is the prospect that price growth will remain higher than anticipated, and for much longer.
“We fully expect headline inflation will come off a bit … but that’s not enough to stop them hiking again,” Mr Langcake said.
Indeed APAC economist Callam Pickering said businesses were still scooping up unemployed workers in huge numbers, with “pent-up demand” for workers still evident across the economy.
“It’s still an economic environment where if you lose your job you can expect to find another quickly and easily,” he said.
Mr Pickering said unemployment will need to rise before inflation cools substantially.
“The fact that hasn’t occurred yet, and if it doesn’t occur in the next few months, [that] naturally supports further rate hikes,” he said.
Ms Murphy said a range of jobs market data is exhibiting strength in the early months of 2023, with there now being just over one person without a job for every job vacancy.
“More Australians are working than ever before to meet the hot demand for employees,” she said. “Hours worked are up 5.5 per cent compared to March 2022, and 8 per cent higher since the start of the pandemic.”
Commonwealth Bank economist Stephen Wu said the jobs market is proving resilient to the rising interest rate, with demand for labour meeting rising population growth in March.
“The labour market survey was a solid print and was above our expectations,” he said.
Analysts at ANZ offered a different view to other economists, saying the “surge” in jobs over March wouldn’t be enough to push the RBA to return to hiking interest rates in May.
“Given the RBA is forecasting unemployment of 3.6 per cent in Q2 [the June quarter] and that a materially lower result than that looks unlikely, the probability of a positive surprise … in the near term is low,” they said.
“We expect the RBA to deliver its next interest rate hike in August.”
