The latest Labour Force figures released by the Australian Bureau of Statistics (ABS) has revealed Australia’s jobless rate fell to 4.4 per cent over May, down from the 4.5 per cent recorded in April.
The number of unemployed people decreased by 18,300 to 671,300 while employment increased by 40,300 people (0.3 per cent) to 14,738,800 people in seasonally adjusted terms.
According to Sean Crick, ABS’s head of labour statistics, the bureau recently recorded “higher proportions of unemployed people waiting to start jobs who then remained unemployed in the following month”.
“The backlog of people waiting to start a job has eased in May, contributing to the 40,000 rise in employment and 18,000 fall in unemployed persons,” Crick added.
Over May, full-time employment grew by 5,000 to 10,140,800 and part-time employment was up by 35,000 to 4,598,000, while the underemployment rate rose 0.1 percentage points to 5.9 per cent.
Meanwhile, the ABS recorded hours worked had dropped 1.1 per cent in May after a 0.9 per cent rise in April.
“In April, less people took leave during the Easter holiday period and instead worked their usual hours, contributing to non-seasonal strength in hours worked,” Crick said. “The fall this month brings hours worked back in line with employment growth since the end of the pandemic in June 2022.”
In trend terms, employment and hours worked both grew by 0.1 per cent over the month, with the underemployment rate falling slightly to 5.8 per cent while the underutilisation rate remained at 10.2 per cent.
Commenting on the figures, Global X ETFs’ senior product and investment strategist, Marc Jocum, said Australia’s labour market has “shown a dose of resilience”.
“However, much of the increase was driven by part-time employment, while underemployment also edged higher, suggesting there remains some spare capacity beneath an otherwise resilient headline result,” he said.
“A rebound from last month’s seasonal softness was widely anticipated given the month-to-month volatility, but the stronger employment result alongside rising job advertisements suggests employers remain more willing to hire than many expected, even as economic growth gradually loses momentum.”
On the implications for the Reserve Bank, Jocum remarked that the RBA’s dual mandate of price stability and full employment has left the board “like a parent trying to watch two children at the playground while keeping their eyes firmly fixed on the one climbing the highest tree”.
“Employment numbers still get checked on, but inflation is where almost all of the central bank’s attention remains.
“A firmer labour market reduces the pressure on the RBA to ease policy quickly, although the part-time skew and fall in hours worked suggest this was not an unambiguously hot labour market print. This suggests the RBA can still afford to wait for clearer evidence that both inflation and economic activity are cooling,” Jocum said.
VanEck head of investments and capital markets, Russel Chesler said the print was “not the clean slowing signal markets were hoping for”.
“For an economy that is supposed to be losing momentum, Australians are still working and still spending,” he said.
“Healthy employment is good but this is the problem: Growth is slowing, household savings are under pressure and consumers are being squeezed, but demand has not cracked.
“At the same time, underlying inflation is moving the wrong way, with trimmed mean inflation rising to 3.6 per cent in May. That combination keeps the inflation fight alive and puts another rate rise back on the table.”
Chesler further stated that VanEck remains data dependent, however, the firm believes there could be one more hike to the official cash rate this cycle,
“The next inflation print will be critical,” he said.
“If employment remains resilient and consumers continue spending despite weaker growth and lower savings, the RBA may have little choice but to tighten again. This is not an economy rolling over, it is an economy sending mixed signals at exactly the wrong time.”
Sentiments about another rate hike were echoed by State Street Investment Management’s APAC economist Krishna Bhimavarapu: “The labour market bouncing back against yesterday’s mixed inflation report allows the RBA to remain on an extended hold.”
“However, the bigger risk is still sticky inflation that precludes it from coming back into the target zone. For this reason, we continue seeing a possibility of another hike later in the year.
“[A]s the cash rate remains elevated for longer, the labour market may gradually loosen with the unemployment rate potentially inching towards our 4.8 per cent forecast.”
