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ABC News
ABC News
Business
business reporters Gareth Hutchens and Rachel Pupazzoni

Unemployment rate jumps from 3.5 per cent to 3.7 per cent in January figures

Faye Pinner lost her job recently when scores of people at her workplace were made redundant (ABC News: Billy Draper)

Australia's unemployment rate has increased from 3.5 per cent to 3.7 per cent according to last month's figures, in seasonally adjusted terms.

The number of employed people fell by 11,500, according to the Bureau of Statistics.

It was the second-consecutive monthly decline in employment.

Economists say it could signal a turning point in the labour market with the Reserve Bank's interest rate hikes finally starting to bite.

But the head of labour statistics at the ABS, Bjorn Jarvis, says some of the increase in unemployment last month was driven by a seasonal fluctuation.

Unemployment rate jumps from 3.5 per cent to 3.7 per cent

He said there was a larger-than-usual rise in the number of unemployed people who have a job to go to in coming weeks.

"January is the most seasonal time of the year in the Australian labour market, with people leaving jobs but also getting ready to start new jobs or return from leave," Mr Jarvis said.

"This January, we saw more people than usual with a job indicating they were starting or returning to work later in the month," he said.

Reserve Bank will keep hiking rates

The rise in the unemployment rate comes as the Reserve Bank of Australia signals its intention to keep hiking interest rates to squeeze inflation out of the economy.

The RBA has been lifting interest rates aggressively since May last year, lifting the cash rate target from 0.1 per cent to 3.35 per cent so far.

This week, RBA governor Philip Lowe acknowledged rates were now at contractionary levels, and you could see that because property prices have been falling and home building has declined.

According to the RBA's central forecast, Dr Lowe said the unemployment rate would probably have to rise to 4.5 per cent by next year to ensure that inflation falls to 3 per cent in coming years.

He said that would be a great thing for Australia because stubbornly high inflation is socially and economically destructive.

Treasurer says slight rise in unemployment figure "no surprise".

Is this a turning point?

David Bassanese, the chief economist for BetaShares, said the economy may be starting to "finally buckle" under the weight of the RBA's rate rises.

He said this softer-than-expected jobs report, combined with recent weak retail sales and a slump in consumer confidence, suggested we may have hit a turning point.

"As such, it suggests the RBA may not need to raise rates too aggressively in coming months," he said.

"With the RBA's own estimates suggesting between 50-75 per cent of the increase in inflation reflects supply factors, and with inflation expectations still largely contained, the economy simply does not yet deserve to go into recession to get inflation under control."

Mr Bassanese said the RBA was obviously trying for a "soft landing" where consumer spending and inflation slowed moderately without unemployment rising too much, but that was not guaranteed.

"Of course, the RBA could make a policy mistake and overly tighten and nudge the economy toward recession," he said.

"That said, I still think the risk of a policy-induced recession is fairly low, as the RBA could easily about-face and slash rates quickly if need be. 

"Despite current budget deficit concerns, the federal government would also likely not be shy in providing support."

The labour market is in flux

The experience of individuals in this labour market is varied.

The ABC spoke to a long-term unemployed person who has recently found a job, a worker who has just lost theirs, and a recruiter in the technology sector who says that sector, at least, seems to be experiencing a significant correction.

Faye Pinner was stood down earlier this month from her UX (user experience) designer job with buy-now-pay-later business Openpay.

"They called a meeting and told us that we were all redundant, so we lost our jobs pretty much in a 24-hour period," she explained.

Faye Pinner lost her job when OpenPay went into receivership. (ABC News: Billy Draper)

"I think it came for a shock for everyone at the company, to be honest; I don't think anyone had an inkling anything was happening."

Almost 90 of roughly 140 Openpay staff have been laid off, as receivers McGrathNicol assess the state of the once publicly-listed company.

Ms Pinner is now trying to secure a new job.

"The first day was a bit of a state of shock and we were all like, 'everything is fine, this is fine, we'll get new jobs'. Then that night, I think it all sunk in," she said.

"This is the longest I've been unemployed since I was 14."

If Ms Pinner remains unemployed for a few weeks her status will be represented in next month's unemployment data.

She has had a couple of job interviews this week and hopes to secure a new role soon.

"But yeah, definitely making a lot more financially savvy decisions, like, what's the cheapest meal I can make that will feed me for five days, and, you know, giving up on luxuries, like no coffees and I've resigned from all my subscriptions like Netflix, the gym — every little win that I could make financially, I have," she said.

On the flip-side, the ABC spoke to a man who had recently found a job after two years of searching.

Matthew Koschel has joined a team of data analysts at Australian Spatial Analytics where the majority of the workforce is neurodivergent, like him.

Matthew Koschel recently started his job as a data analyst with Australian Spatial Analytics in Melbourne (ABC News: Billy Draper)

"For the two years before I got this job, I was essentially on JobSeeker or JobKeeper, whatever the name is of it was at the given time," he said.

"So, a combination of that and just being very frugal, but it's definitely not the preferred way of doing anything, it's definitely much better to have this employment than to be on any kind of payment like that."

Mr Koschel says he's still keeping a close eye on his income, even after finding a job, because costs are still rising.

But he likes working with colleagues who are neurodivergent.

"It's been really nice to have that sort of accommodation, but also have other colleagues who have a very different viewpoint on what you're doing," he said.

The ABC also spoke to a recruiter in the technology sector.

Anthony Sochan, a partner at recruitment firm Think and Grow, says the industry is going through a major shakeup.

Tech sector recruiter Anthony Sochan, at his Chippendale office in Sydney, says it's "quite a confusing market" right now (ABC News: John Gunn)

"We're seeing a story of contrasts: on one hand, we have some customers that are making layoffs, they have fairly widespread and quite deep job losses and redundancies; and then on the other hand, we have companies that are not thinking twice and just operating business-as-usual, meaning they're hiring at the same rate that they have been for the last couple of years," he said.

Mr Sochan said the last time he saw this kind of sector overhaul was during the global financial crisis.

"Absolutely there were many businesses that were letting people go and we saw a similar level of job losses to what we're seeing now," he said.

But he added, this time is far more unusual.

"What I would also contrast that with is, we're also still seeing quite strong demand for new hires, as well," he said.

"It's quite a confusing market in that, generally, when a market is under stress, it's quite strongly going left or right meaning it's either in growth, or it's in decline, but right now we're actually seeing both of those play out at the same time."

He expects that will only start to calm down when businesses have more confidence in economic conditions and certainty over access to funds.

"A lot of the businesses that we work with in particular require capital to grow and that capital comes from one of two areas primarily, either from venture capitalists, or from the public markets in the form of an IPO [initial public offering].

"The IPO market is not looked on that favourably at the moment and likewise, venture capitalists are not deploying capital at the same rate.

"However, that will change at some point in the near future and I believe that will be when interest rates peak," he said.

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