The unemployment rate in Australia declined last month, despite the fact that companies cut roughly 40,000 full-time posts. This sends contradictory signals about the necessity of another interest rate increase by the Reserve Bank of Australia to cool the economy.
According to the latest data released by the Australian Bureau of Statistics on Thursday, the unemployment rate dropped to 3.6% in September from the previously reported 3.7% in August. Economists had anticipated that the unemployment rate would not move from its current level of 3.7%.
The number of full-time positions was lowered by 39,900, despite the fact that the economy added a net of 6,600 jobs. Forecasts had generally agreed that there would be an increase of 20,000 jobs in the labor force.
The crucial element was the decline in the participation rate, which went from record levels of 66.7% to a level that was 0.2 percentage points lower. Additionally, the number of hours worked decreased to 1.93 billion.
“The fall in the unemployment rate in September mainly reflected a higher proportion of people moving from being unemployed to not being in the labour force,” said Kate Lamb, who is the head of labour statistics for the agency.
When looking at the preceding two months, the average monthly employment growth was 35,000 people, which is approximately the same rate we’ve seen over the past year.
The Reserve Bank of Australia also decided to keep its fixed interest rate at its current level for the next four months as it evaluates whether or not the record-setting run of 12 rate rises between May 2022 and June of this year were sufficient to tame inflation.
Inflation will have returned to the bank’s desired 2-3% range by the time June 2025 rolls around, according to its predictions from August. The projection that the unemployment rate will reach 4% by the end of 2023 has also been predicted by the central bank, however on November 10 they will announce revised estimates.
The results have been welcomed as “a very welcome result” by the treasurer, Jim Chalmers, and the total number of jobs that have been created in the economy since May of the previous year has now reached a net total of 561,500.
According to Chalmers, “this is the most jobs created in the first term of any government on record, and we’re only halfway through the term,” after the Australian Bureau of Statistics began publishing monthly employment numbers, just 19 months had been in the range of 3%, with 16 of those months coming after Labor took office.
The immediate reaction of the market was a drop in the value of the Australian dollar below the 63.0 US-cents level, which indicated that traders had reduced their expectations of another rate increase by the RBA. By the early afternoon, the day’s losses on the stock market had been cut down to approximately 1.2%.
“The recent softening in hours worked, relative to employment growth, may suggest an easing in labour market strength,” said Lamb. “However, this also follows particularly strong growth over the past year.”
According to Tapas Strickland, head of market economics for Nab, the disparity in the numbers makes it difficult to analyze the data. “dog’s breakfast” The real unemployment rate was 3.557%, which indicates a 10% decrease over the course of the month.
“For the RBA we’d see this as a result that is broadly in line with expectations,” Adam Boyton, head of Australian economics at ANZ, said. “This shifts the attention squarely onto the CPI on the following [Wednesday] in advance of what appears to be a live RBA Board meeting in November.”
According to David Bassanese, the chief economist for Betashares, aggregate hours worked decreased by 0.9% during the September quarter, erasing some of the 2.9% gain that occurred during the previous June quarter.
“All in all, today’s report is not the type of ‘red flag’ the RBA would need to see to justify a rate hike at the November policy meeting,” Bassanese said. “The RBA would need to see this type of’red flag’ to justify a rate hike.”
New South Wales and Western Australia both reported unemployment rates of 3.3%, which was the lowest percentage among the states. New South Wales’ rate fell from 3.6% in August, while Western Australia’s rate fell significantly from 3.8%. The unemployment rate in Victoria remained the same at 3.5%, while it dropped from 4.1% to 3.9% in Queensland.
Seasonally adjusted, the unemployment rate in the Australian Capital Territory increased from 3.1% to 3.9%, which resulted in the territory losing its position as having the lowest rate in the nation.
Labor expenses were up by 1.8% in September quarter compared to three previous months, according to a separate poll of businesses conducted by NAB. The availability of workers is cited as a “significant constraint” by almost forty percent of businesses.
Nevertheless, the results of the study showed that fewer businesses anticipate “significant wage pressures in the next six months, suggesting that the peak in wage pressure may have occurred” in the quarter that has just come to an end.
“For the time being, it appears that labor demand is keeping pace with the strong rebound in population,” Alan Oster, the chief economist at NAB, said. “However, we anticipate that the labor market will gradually ease over time.”
According to the study, other aspects of the economic climate remained favorable, with “business conditions remaining robust” and “forward orders edged back into positive territory.”