September’s jobless figures may have remained steady, but a deeper dive shows the seemingly dull and inert data is worth a closer look.
The labour market numbers from the Australian Bureau of Statistics are, on the face of it, almost as steady as is statistically feasible.
Not only is the jobless rate calm at 3.5% for a second month in a row, and the participation rate stuck at 66.6%, just 900 jobs were added in an economy employing almost 13.6 million people.
Such steadiness amid the buffeting from all sides, though, was notable.
The labour market was surprisingly resilient during the Covid pandemic in Australia and elsewhere. And some economists say it remains the reason to be generally confident the country will avoid a recession despite those “economic headwinds” we keep hearing about that are stirring in the US, China and Europe.
As the Reserve Bank governor, Philip Lowe, and others have highlighted, the unemployment rate was expected to soar to 15% in the worst-case Covid scenarios. In the end, it peaked at half that rate as the RBA, federal and state governments, pushed every stimulatory button they had.
How Australia's jobless rate is holding up - despite the rate rises. (Source: ABS) pic.twitter.com/77JnZblUlP
— Peter Hannam (@p_hannam) October 20, 2022
The treasurer, Jim Chalmers, will provide the government’s projection of where the jobless rate is headed at next Tuesday’s budget. It’s unlikely to budge if recent predictions from the RBA and the International Monetary Fund are any guide.
Minutes from the RBA’s October board meeting – which approved a sixth interest rate rise in as many months – showed the central bank anticipated “a further decline in the unemployment rate over the months ahead”.
That dovetailed with its quarterly economic forecasts, released in August. These pointed to a jobless rate of just 3.25% by the end of 2022, rising back to 3.5% 12 months later, even as GDP growth should slow by more than half to 1.75% by then.
September's jobless rate may be flat at 3.5% but there are still an abundance of job vacancies by historical levels. (Source, via @ANZ_Research ) pic.twitter.com/tx7QnbEAVT
— Peter Hannam (@p_hannam) October 20, 2022
The IMF predicted earlier this month that a third of the world’s economy would be in recession in 2023. For Australia, though, the jobless rate would hover around current levels, ending this year at 3.6% and edging to 3.7% by the end of 2023.
“It wasn’t that long ago the RBA was revising down its assumptions for what represented full employment,” said Stephen Smith, a partner at Deloitte Access Economics. The bank settled on a figure of 4-4.5%, or a lot higher than current levels.
“Getting back up to that level is still a very strong labour market,” Smith said.
“The strength of the labour market is one of the most important positives about the Australian economy at the moment,” he said. “It provides a really strong structural foundation … going into what we think will be a more challenging time in the global economy.”
Catherine Birch, a senior ANZ economist, said the September jobs figures were slightly softer than expected. ANZ had dipped the jobless rate would drop to 3.3%, which would have been a fresh near 50-year low.
Birch said that while leading indicators such as ANZ job ads and ABS job vacancies had started to ease, they remained “extremely high relative to pre-pandemic levels”.
“Our expectation of ongoing tightness in the labour market underpins our view that while Australia’s economic growth will slow below trend in the second half of 2023 and further in 2024, we should avoid an outright downturn,” Birch said.
She noted NAB’s September quarter business survey out on Thursday showed about 91% of businesses reporting difficulty in finding workers, acting as a constraint on growth.
“As long as most people who want a job have a job or can find one quickly, and anyone who loses a job can find another quickly, it’s really hard to see a sharp deterioration in the economy,” Birch said.
“If people have jobs, they’re more likely to be able to continue spending, paying rent, making mortgage repayments and so on.”
All that sounds a lot like the “even keel” the RBA says it is aiming for. We should be thankful if the economy gets to enjoy a decent spell of such plain sailing.
