The resilience of the Australian jobs market has surprised again although the latest set of labour data is unlikely the smoking gun needed to lift interest rates again next month.
Demand for labour is expected to wind back as the economy slows in response to elevated inflation and higher interest rates, though it’s taking a long time to materially slacken.
The official jobless rate ticked higher in October when the Australian Bureau of Statistics dropped its monthly labour force survey on Thursday, lifting to 3.7 per cent from 3.6 per cent.
While in line with consensus forecasts, it is still low compared to the historical normal.
Forecasters were more surprised by the 55,000 jobs created over the month, with 25,000 pencilled in. The participation rate also increased by 0.2 percentage points to 67 per cent.
ANZ economist Blair Chapman said the bigger-than-expected employment jump could be partly explained by the temporary staffing of voting booths for the Indigenous voice referendum, with the bulk of October’s newly created jobs – 37,900 – part-time roles.
There was a smaller 17,000 increase in full time employment over the month.
Employment growth was also waning when the data was smoothed out over a period of time, with the big jump in October following a more modest 8000 increase in September
“Looking over the past two months, these increases equate to average employment growth of around 31,000 people a month, which is slightly lower than the average growth of 35,000 people a month since October 2022,” ABS head of labour statistics Bjorn Jarvis said.
An uptick in the youth unemployment rate to 9.1 per cent – to its highest point since December 2021 – was read by economists as a further sign of a labour market cooling around the edges.
Treasurer Jim Chalmers welcomed the relative strength in the labour market recorded last month.
“A secure job with decent pay is central to our efforts to help people with the cost of living,” he said in parliament on Thursday.
Shadow treasurer Angus Taylor said the October dataset suggested Australians were under pressure to make ends meet.
“What is clear in this data is that Australians are working hard to keep their heads above water because this government has been making the wrong decisions,” he said.
The labour market is expected to soften as higher interest rates weigh on economic activity and as a consequence, the need for labour.
The Reserve Bank of Australia sees the unemployment rate averaging roughly 3.8 per cent in the December quarter, before drifting up gradually to 4.3 per cent by mid 2025.
AMP Australia economist Diana Mousina said the October numbers did not throw out the central bank’s projections.
“Today’s figures don’t provide enough of a ‘smoking gun’ for a follow-up rate hike at the December board meeting,” she said.
But a February increase remained a possibility, she added, if the December quarter inflation data proves too firm.
The economist also said the surprising resilience of the labour market throughout 2023 was supporting household spending even as the RBA hoisted interest rates and the cost of living remained high.
Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said the labour market was still tight enough to generate strong wage growth, bolstering the case for another rate hike in December.
“While the unemployment rate ticked up in October, overall we see this a relatively strong print, and shows the labour market continues to defy the gravity of slowing activity and softening forward indicators,” he said.