Construction workers in Brisbane
Australia's jobless rate has lifted to above four per cent for the first time in two years. Image by Jono Searle/AAP PHOTOS
  • economy, business and finance

Australia’s jobless rate hits two-year high

Poppy Johnston February 15, 2024

Cracks are starting to appear in the Australian labour market, with the jobless rate reaching a two-year high. 

The jobless rate as measured by the Australian Bureau of Statistics breached the four per cent threshold for the first time in two years – reaching 4.1 per cent in January, up from 3.9 per cent in December.

While only a little higher than consensus forecasts, the lacklustre 500 jobs added to the economy fell far short of the 25,000 pencilled in by forecasters.

Most economists were expecting a rebound after the sharp 62,7000 decline in employment in the month prior.

The participation rate remained steady at 66.8 per cent.

Treasurer Jim Chalmers said the labour market was easing in line with expectations as higher interest rates worked to slow the economy.

“I wanted to put these numbers into perspective by saying that 4.1 per cent is still very low by historical standards,” he told reporters in Canberra. 

Treasurer Jim Chalmers
 Treasurer Jim Chalmers says the jobless rate is low by historical standards. Image by Mick Tsikas/AAP PHOTOS 

Shadow Treasurer Angus Taylor said the worst result in two years was worrying and “an indication the Albanese government needs to get serious about jobs”.

“Jobs have been all that have kept people afloat during Labor’s cost of living crisis, and now, Labor’s policies to increase the cost of everything is coming home to roost.”

Australian Bureau of Statistics head of labour statistics Bjorn Jarvis said shifting behavioural patterns could, in part, explain the uptick in the unemployment rate. 

More people than usual said they were unemployed but either due to return to work or start a new gig soon.

A similar pattern had been observed in January over the past two years.

AMP deputy chief economist Diana Mousina said this suggested the weakness in the January dataset was overstated. 

“Despite the potential for some seasonal issues in the data, it is clear that the labour market has weakened since 2023 and a further slowing in jobs growth is expected, based on leading indicators,” she said.

Applicants per open job have been on the rise, for example, pointing to more competition for vacant roles.

The health of the labour market is monitored closely by the Reserve Bank, with unemployment expected to move higher gradually as the economy slows.

Its latest forecasts have the jobless rate reaching 4.2 per cent in the middle of the year and 4.3 per cent in December.

While the latest labour force numbers hint of a labour market softening ahead of schedule, Ms Mousina said it was “currently not bad enough to justify a near-term RBA rate cut”.

She said the RBA would be mindful of the seasonal issues in play and factor in broader measures of the labour market, such as underutilisation, which remains below its pre-COVID average.

Interest rates are broadly expected to stay on hold until cuts start in the second half of the year, although AMP is forecasting an earlier start than consensus as the economy loses momentum. 

Household spending, for example, has been trending weak.

Summer holidays and New Year’s resolutions helped fuel a 3.1 per cent improvement in CommBank’s household spending insights index.

Recreation spending – including travel, airlines and gyms – jumped 13.5 per cent in January after a 5.8 per cent decline in December.

CBA chief economist Stephen Halmarick said spending had been swinging around over the summer months, with the January rise still not enough to unwind the 3.5 per cent fall in December 2023.

“The trend for Australian household spending is softening, with the bounce in January not enough to make up the declines from December,” Mr Halmarick said.