Australia’s economy shed 27,100 full-time jobs last month, easing concerns that the Reserve Bank may need to hike its interest rate again to curb inflation.
The country’s unemployment rate in April rose to 3.7%, seasonally adjusted, the Australian Bureau of Statistics said on Thursday, up from a reported 3.5% for March. Economists had forecast it would remain at March’s 3.5% level, close to a half-century low.
The loss of full-time roles outweighed a gain of 22,800 part-time positions. The net loss was 4,300 jobs compared with economists’ expectations of a gain of 25,000 jobs for the month.
The treasurer, Jim Chalmers, said the government had expected the unemployment rate to “tick up a little bit as it has today”.
“We are still talking about something like 330,000 new jobs created in the life of this Albanese government, not yet one year old,” Chalmers said, adding the jobless rate was “still remarkably low given what has come at us from around the world”.
The recent federal budget forecast that the jobless rate would end the June quarter at about 3.5% before rising gradually to 4.25% by mid-2024 and 4.5% a year later.
A higher-than-forecast unemployment rate may add expenses and cut revenue, chipping into the government’s projected $4.2bn surplus for the current fiscal year.
The labour market has been tight since Covid-related restrictions curbed the influx of migrants and foreign students. Even as those curbs have ended, job openings have remained relatively plentiful, helping to nudge annual wage growth to its highest in more than a decade.
Ahead of today's April jobs data from the ABS, investors saw no chance of a June rate rise by the RBA. There's a bit over a 1:3 chance of a rise in August. The timing of the first rate cut, meanwhile, has drifted back to next April. pic.twitter.com/eiK8azx7ju
— @phannam@mastodon.green (@p_hannam) May 18, 2023
The markets viewed the labour data as relatively weak. The Australian dollar dropped about a quarter of a US cent immediately to about US66.36c, and the ASX extended its gains for the day another 0.2% or so. The shifts were pared back in afternoon trading.
KPMG economist Michael Malakellis said the rise in unemployment is “not welcome” but it does give the RBA some evidence that inflationary pressures are easing.
“The jobs data, together with yesterday’s wage data, suggest that the peak in the tightening cycle is near.”
Bjorn Jarvis, the ABS’s head of labour statistics, said the small fall in overall jobs for April compares with an average monthly increase of about 39,000 people during the first quarter of this year.
The employment-to-population ratio fell 0.2 percentage points to 64.2% and the participation rate shrank 0.1 percentage points to 66.7%.
“Even with these falls, both indicators were still well above pre-Covid-19 pandemic levels and close to their historical highs in 2022,” Jarvis said.
Hours worked was one statistic that rose, increasing 2.6% in April because fewer people than usual worked reduced hours over the Easter period, Jarvis said.
“This may reflect more people taking their leave earlier or later than usual, or that some people were unable to, given the high number of vacancies that we’re still seeing employers reporting.”
Jameson Coombs, an economist at St George Bank, said the jobs market had marked “a significant turning point” as the ability of firms to soak up overseas arrival appears to be waning.
“Momentum is softening as the labour demand cools.”
June rate hike ‘unlikely’
George Tharenou, an economist at UBS, said the jobs report was “clearly weaker than expected” and makes an RBA rate hike in June “unlikely”.
“But we think it will probably take the RBA another month or two of weakness to more definitely shift their medium-term view,” Tharenou said, adding UBS still expected the bank to hike rates again, most likely in July once the upcoming minimum wage decision lands.
The independent economist Chris Richardson said his “best guess” was the budget should remain in surplus as buoyant commodity prices count more in the near terms than a bump in the jobless rate. “The government would already have budget information through to mid-May – so if they were getting nervous on the surplus, they’d start hedging the words,” he said.
Belinda Allen, a senior economist at Commonwealth Bank, said that while the jobless rate rose, the participation rate remains higher than the budget forecast.
Among the major states, NSW had the lowest jobless rate at 3.4%, with the ACT clocking 3%. Victoria, Queensland and Tasmania all posted a 3.9% unemployment rate, with South Australia’s 4.3% level the highest.
