Another steady month for jobs numbers has seen economists reconsidering their rate cut predictions, with data from the Australian Bureau of Statistics (ABS) showing the unemployment rate holding steady at 4.1 per cent in April.
There was also considerable growth in employment, with 89,000 people entering the workforce and 6,000 leaving.
Employment has grown by 390,000 people, or 2.7 per cent, over the year, which the Australian Bureau of Statistics noted is higher than the population growth rate for people aged 15 years and over, which was 2.1 per cent over the same period.
The strong growth in employment led to a rise in the employment-to-population ratio of 0.3 percentage points to 64.4 per cent in April, just below the record high of 64.5 per cent seen in January.
The addition of 6,000 unemployed people meant the labour force grew by 95,000 people and the participation rate rose by 0.3 percentage points to 67.1 per cent.
Sean Crick, ABS head of labour statistics, said: “The participation rate for 35–44 year-olds had the largest annual growth, up 1.9 percentage points to 88.3 per cent.”
The ABS also noted that the trend unemployment rate, which remained at 4.1 per cent in April, has been within a relatively narrow range of 3.9 and 4.1 per cent for the past 17 months.
Employment grew by around 26,000 people (0.2 per cent) in April and 2.5 per cent over the last 12 months.
“In trend terms, the employment-to-population ratio remained at 64.3 per cent in April, while the participation rate remained at 67.0 per cent,” Crick said.
Commenting on the ABS figures on Thursday, VanEck’s head of investments and capital markets, Russel Chesler, said the unemployment rate is like a “boulder lodged in the economy’s path”.
“It has barely moved in three years, even throughout the RBA’s tightening cycle, and this has contributed to the stickiness of services inflation,” Chesler said.
“With continuing low unemployment rate and wage growth having accelerated to 3.4 per cent, further falls in inflation will be limited – there is actually a risk of inflation increasing. The latest data shows inflation is within the RBA’s target range, but it won’t take much to push it back up past the 3 per cent mark.”
The figures haven’t impacted expectations for a rate cut next week, he added, but this outcome isn’t “strictly necessary” given macroeconomic conditions.
“For further cuts to occur this year, we will need to see a change in the economic landscape particularly on the employment front,” Chesler said.
HSBC’s Paul Bloxham said the unemployment rate will be the key metric for the RBA’s decision, rather than the “statistical quirks” driving the recent employment figure volatility.
“All up, that leaves the RBA with core inflation and the unemployment rate broadly in line with their own expectation, but the recent local growth indicators have been a bit weaker than expected,” Bloxham said.
“In themselves, this could be enough to see a cut or could see them holding steady next week. However, we expect the RBA to deem that the tumultuous global events over the past six weeks, which kicked off with the ‘Liberation Day’ trade policy shock, is a downside risk to global growth which we think will get them over the line for cutting the cash rate by 25 bp on 20 May.”
Also considering the swings in headline employment numbers to be an outlier, State Street Global Advisors APAC economist Krishna Bhimavarapu said the data “nonetheless puts our call for four more rate cuts this year at risk”.
“However, we believe the GDP data to be released on 4 June will reclarify the necessity for lower rates, especially as last week’s data showed that retail volumes had stalled,” Bhimavarapu said.
“We still expect the RBA to cut the cash rate by 25 bps next week to 3.85 per cent and maintain the view that the cash rate may end 2025 at 3.10 per cent.”
MFS Investment Management has also maintained its expectation of multiple cuts in this cycle, with fixed income research analyst Carl Ang pointing to global developments to “increase the scope for a more tangibly dovish pivot from the RBA”.
“Economic data so far has ranged from broadly neutral to slightly soft in tone, like the flat real retail sales growth over the first quarter,” Ang said.
“Moreover, downside risks and uncertainty around Australia’s economic outlook have increased substantially, factoring in Liberation Day, global tariff movements since then as well as the Australian federal election.”
Despite the strong jobs figures, money markets are standing firm on a 25 basis point cut at the 20 May meeting,
