In the previous month, Australia’s unemployment rate experienced a decline despite a reduction of nearly 40,000 full-time positions by employers.
This development has created mixed signals regarding the necessity of another interest rate hike by the Reserve Bank to curb economic growth.
According to the Australian Bureau of Statistics, the unemployment rate in September was 3.6%, down from the reported 3.7% in August. Economists had predicted that the unemployment rate would remain steady at 3.7%.
Although employers cut back on full-time positions by 39,900, the overall workforce added a net of 6,600 jobs. The consensus among economists had anticipated a workforce expansion of 20,000 jobs.
The pivotal factor in this scenario was the decline in the participation rate, which dropped by 0.2 percentage points to 66.7% from its record levels. Additionally, the total hours worked contracted to 1.93 billion.
Kate Lamb, the head of labor statistics at the bureau, noted, “The decline in the unemployment rate in September mainly reflected a higher proportion of people moving from being unemployed to not being in the labor force. Looking over the past two months, average monthly employment growth was 35,000 people, around the average growth we’ve seen in the past year.”
The Reserve Bank of Australia (RBA) has kept its key interest rate unchanged for four months, evaluating whether the record series of 12 interest rate increases from May 2022 to June this year has been sufficient to control inflation. In August, RBA estimated that inflation would return to the bank’s preferred 2-3% range by June 2025. The central bank has also forecasted that the unemployment rate would rise to 4% by the end of 2023, though it is set to release revised estimates on November 10.
Treasurer Jim Chalmers welcomed the data, emphasizing it as “a very welcome result.” The total number of jobs created in the economy since May last year has now reached a net of 561,500. Chalmers stated, “This is the most jobs created in the first term of any government on record, and we’re only halfway through the term.” Since the Australian Bureau of Statistics began publishing monthly job figures, only 19 months have been in the 3% range, with 16 of them occurring since the Labor government took office.
The initial market response was a drop in the Australian dollar below the 63.0 US-cents mark, down from above 63.3, indicating that traders had lowered their expectations of another RBA rate increase. Stocks reduced their losses for the day to be about 1.2% lower by early afternoon.
CreditorWatch Chief Economist, Anneke Thompson said: “The Australian labour force remains relatively resilient, with an additional 6,700 people gaining employment over the month of September. However, digging deeper into the data, the change in employment – a decrease in the unemployment rate from 3.7% to 3.6% – was due to an increase in part time employment, and decrease in full time employment. Overall hours worked actually decreased by 0.1%, and the participation rate also fell from record highs, to 66.7%, supporting our case for another rate hold at the RBA’s November meeting.
“This data suggests some easing in the tightness of the labour force, and may also reflect lower hours worked in industries that offer more casual hours. The discretionary retail sector is being heavily impacted by very low consumer confidence and high interest rates and is also a large employer of workers on hourly rates. It is therefore not surprising that hours worked is starting to fall. The construction sector also is a large employer of casual labour, and the slowdown in building approvals is also starting to bite this sector.
“CreditorWatch’s annual value of invoices for small businesses has been decreasing for some time, reflecting the lower job values the sector is currently experiencing. While not a new trend, it is continuing following lockdown periods, when we first recorded the value of invoices dropping. This suggests that smaller businesses are probably feeling the slowdown in business conditions earlier than bigger businesses, and reducing hours of work offered as a result.”
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