Australia’s unemployment rate falls to 3.4% as ‘very tight’ labor market puts pressure on RBA | Australian economy

Australia’s unemployment rate fell in October as the labor market added more jobs and workers clocked up more hours, underscoring the resilience of the economy amid a record series of interest rate rises unleashed by the Reserve Bank.

The economy’s jobless rate was 3.4% last month, returning to a half-century low reached in July, the Australian Bureau of Statistics said on Thursday. Economists had expected a modest increase to 3.6%.

Employers added about 32,000 jobs, with slightly more than half of them full-time. The number of hours worked rose 2.3% to 1,864m. The participation rate, which gauges how many people are looking for work, eased slightly to 66.5%.

“The participation rate was 0.2 percentage points below the record high of 66.7 per cent in June 2022, but 0.7 percentage points higher than before the pandemic,” said Bjorn Jarvis, a senior ABS official.

Flood events across New South Wales, Victoria and Tasmania meant more people were working reduced hours due to bad weather, increasing from 66,000 people in September to 100,000 in October 2022, the ABS said.

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The latest jobs figures indicate labor market conditions remain very tight despite the RBA lifting its cash rate for seven consecutive months. Today’s numbers will likely raise expectations the central bank will raise the rate again when its board meets on 6 December.

Australia’s jobless rate is back to the 3.4% level touched in July…despite the spate of RBA rate rises. Today’s strong labor market numbers suggest more increases to come. (Source: ABS).

— (@p_hannam) November 17, 2022

Sean Langcake, head of macroeconomic forecasting at BIS Oxford Economics, said the “strong” October figures point to a “very tight labor market”, with employers likely increasing staff hours to make up for difficulty in luring or keeping workers.

“The RBA will likely want to see more of a tapering in demand to avoid a sharp breakout in wage growth,” Langcake said. “We expect to see a further 75 basis points of tightening before the RBA pauses the current rate hiking cycle.”

Economists at the ANZ agreed: “A solid labor market result in October combined with the strong Q3 wage data yesterday points to another 25bp hike by the RBA at its December meeting.”

The cash rate was lifted earlier this month to 2.85%, up from the record low of 0.1% at the start of May. Prior to today’s jobs figures, markets were forecasting a peak cash rate of just over 3.8% in the second half of 2023.

‘Strong’ WPI figures yesterday not showing up in elevated expectations of higher interest rates from the RBA. Odds of an 8th rise in 8 meetings in December even eased a bit, to a 59% chance (from 62%).

— (@p_hannam) November 16, 2022

The combined rates of unemployed and underemployment – ​​those who’d like to work more – fell 0.2 percentage points to 9.3%, the lowest since March 1982.

Jarvis said there were now 236,000 fewer unemployed people and 365,000 fewer underemployed people than in March 2020.

“Unemployment and underemployment are both now around two-thirds of what they were,” he said.

One thing holding back staff availability is illness, with an increase of about 30% in the number taking sick leave compared with a year ago.

Still, October was the first month this year that the number of people cutting back on work for illness fell below half a million, with 467,000 fitting this category, Jarvis said.

Among the jurisdictions, the ACT maintained its standing with the lowest jobless rate in the country at 3.1%.

But NSW’s rate wasn’t far behind, dropping 0.1 percentage points to 3.2%, its lowest level since records began in 1978, state treasurer Matt Kean said.

NSW accounted for more than the total jobs gained nationally, with 34,600 added last month. The 42,200 additional full-time roles were more than double the national tally, and helping to “keep the nation in positive territory”, Kean said.

In Victoria, where voters are voting in a state election, the jobless rate was steady at 3.5%.

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