Australia’s jobless rate held steady in December but employers shed more than 100,000 full-time jobs as the impact of higher interest rates dragged on the economy.
The unemployment rate for the month was a seasonally adjusted 3.9%, the Australian Bureau of Statistics reported on Thursday. That compared with economists’ forecast of 3.9% and the previously reported 3.9% rate for November.
The surprise, though, was the net loss of 65,000 jobs for December, compared with market expectations of an additional 15,000.
Full-time jobs dived by 106,600, the most since May 2020 during Covid, according to Bloomberg. Part-time positions only clawed back 41,400 positions.
Another surprise was the steep drop in the participation rate, a gauge of the proportion of the population looking for work. That dropped from a revised record 67.3% in November to 66.8%. Hours worked also slid 0.5% for the month.
The jobs figures are the first major statistics released for December and offer one indicator of the strength of the economy at the end of last year. The labour market has generally surprised economists for its strength since the Covid disruptions here and in other nations.
The Reserve Bank forecast in November that the the jobless rate will drift higher to about 4.25% by the end of 2024. Its board will meet for the first time this year on 5-6 February when it will also release updated economic forecasts.
Prior to today’s figures, all of the big four banks were forecasting the RBA wouldn’t need to add to its 13 interest rate rises since May 2022. A first rate cut should arrive by the second half of this year.
With NAB now ditching its forecast for an RBA rate rise next month, all of big four banks tip the next move will be a cut. CBA, the biggest mortgage issuer, predicts the most cuts this year, with three reductions to end 2024. (Source: @RateCity ) pic.twitter.com/2ZW9C4fK43
— @phannam@mastodon.green (@p_hannam) January 17, 2024
The ABS said last month’s poor results followed a better performance in the previous two.
“The fall in employment in December followed larger than usual employment growth in October and November, a combined increase of 117,000 people, with the employment-to-population ratio and participation rate both at record highs in November,” said David Taylor, ABS’s head of labour statistics.
“While the December employment fall was large, the number of employed people was still 52,000 higher than September,” he said. “Looking over the past twelve months, seasonally adjusted employment increased by an average of 32,000 people per month, showing reasonably strong underlying growth during 2023.”
Hours worked had been dropping through the second half of last year and were now back to the levels of last February, Taylor said.
Ben Udy, lead economist for Oxford Economics Australia, said that “[w]hile we’re always cautious to avoid reading too much into a single monthly data point, the deterioration in the labour market is clearly in full swing”.
“We expect this softening to continue in 2024 and forecast the unemployment rate to approach 4.5% by the end of this year,” Udy said.
David Bassanese, chief economist for BetaShares, said the sharp drop in employment last month “should be taken with a grain of salt given the volatility in the jobs numbers over recent months”.
“Any upward drift in the unemployment rate over 2024 will give the RBA more room to move in terms of rate cuts over the year,” Bassanese said.
Across the states, NSW continued to have the lowest jobless rate at 3.4%, unchanged from November. Victoria’s rate was also unchanged at 4% while Queensland’s improved to 4.3% from 4.4%. The ACT and WA were two regions to see the rate tick higher, coming in at 3.9% for both.
The ABS noted floods and storms in parts of Queensland had made it harder to gather data for that state. Still, it deemed the figures were “fit for publication without any need for imputation” but was open to undertaking “additional analysis of the collected data to ensure the quality of final estimates”.
Market reaction was limited. The Aussie dollar initially dropped about 0.1 US cent but remained at about 65.5 US cents, while the stock market modestly pared its losses for the day.
