Despite the unemployment rate holding steady at 4.1 per cent, the latest Australian Bureau of Statistics (ABS) data revealed a sharp drop in employment, with 53,000 fewer people in work last month.
The seasonally adjusted unemployment rate remained steady at 4.1 per cent in February, according to data released today by the ABS.
According to Bjorn Jarvis, ABS head of labour statistics, employment fell by 53,000 in February, while the number of unemployed dropped by 11,000, keeping the jobless rate steady at 4.1 per cent.
He attributed the decline in employment partly to fewer older workers re-entering the workforce, reversing a trend of higher participation in recent years.
“In contrast, we continue to see growth in employment for people aged between 15 and 54 over the year,” Jarvis said.
However, despite the fall in employment in February, in seasonally adjusted terms it was still around 266,000 people – or 1.9 per cent – higher than last February.
This annual growth rate is around the 20-year pre-pandemic average of 2.0 per cent.
“While the employment-to-population ratio fell 0.4 percentage points to 64.1 per cent in February, it is still only 0.4 points below its historical high in December, and around where it was in June 2024,” Jarvis said.
The participation rate also fell, down by 0.4 percentage points to 66.8 per cent, but it remains “relatively high”, according to Jarvis.
‘Unusual’ set of numbers
HSBC’s Paul Bloxham described the data as “unusual”, noting that while there was an unexpected employment drop, falling underemployment and steady job vacancies suggest the market remains tight.
“As with all data surveys, from time to time there are quirky results, and that’s how we would categorise today’s print,” Bloxham said.
“We expect the RBA will see it the same way.”
Bloxham believes the RBA will look at the overall picture and range of indicators – including their own business liaison program – to assess the jobs market conditions.
“If anything, in times like this, the unemployment rate can often be the indicator that is most relied upon to judge conditions – and it remained steady, as expected,” he said.
“We see the RBA as on hold at its next meeting on 1 April and do not expect the next cut until Q3 2025.”
Similarly, David Bassanese, chief economist at Betashares, said Thursday’s data needs to be “taken with a grain of salt”.
“I continue to believe the labour market remains quite firm, albeit not to the extent that it should cause inflationary concerns given recent declines in wage growth,” he said.
“With regards the Reserve Bank, most critical to the interest rate outlook remains the consumer price inflation reports – if these continue to show declines in underlying inflation, as I expect, the RBA remains on track to cut interest rates further in coming months.”
Bassanese also called on the government to refrain from unleashing “a new torrent of government stimulus”, particularly in the form of demand boosting new spending or tax cuts.
ANZ’s economist Aaron Luk and head of Australian economics Adam Boyton wrote in a note on Thursday that the jobs data in isolation is unlikely to have a “material impact” on the RBA’s next policy decision.
In fact, the bank’s economists believe there won’t be another rate cut for months.
“Labour market fundamentals remain solid, with an overall robust trend in employment growth, a low unemployment rate and an elevated level of job advertisements,” the pair said.
“We maintain our stance that this easing cycle will be a shallow one, with only one more rate cut to come in August.”
CBA’s Gareth Aird, while agreeing the latest jobs data will have little impact on the RBA, expects a 25 bp rate cut in May.
Aird, usually the most optimistic of the economists, added that if inflation data “send a strong signal that the Q1 25 trimmed mean CPI is likely to print comfortably below the RBA’s 0.7 per cent quarterly forecast then the April board meeting could shift to ‘live’”.
