Job growth slows in September as interest rate hikes hit
Australian employment remains positive but job growth is starting to slow as the full impact of interest rate rises flows through the economy, ABS data shows.
The unemployment rate in Australia fell 0.1 percentage point to 3.6 per cent in September, according to Labour Force data released yesterday by the Australian Bureau of Statistics (ABS).
ABS head of labour statistics Kate Lamb said with employment increasing slightly, by around 7,000 people, and the number of unemployed people falling by around 20,000, the unemployment rate fell 3.6 per cent in September.
“It is important to remember that a fall in unemployment does not always mean much higher employment,” said Ms Lamb.
“The fall in the unemployment rate in September mainly reflected a higher proportion of people moving from being unemployed to not in the labour force.”
AMP deputy chief economist Diana Mousina said while the recent employment data indicates that job growth remains positive, it is slowing.
“This was expected given the increase in interest rates since May of last year,” said Ms Mousina.
“Full-time jobs fell by 39.9K in September and have been very soft in the past few months but part-time jobs rose by 46.5K in the month and have been strong over recent periods, offsetting the weakness in full-time jobs,” she said.
“Hours worked continued to slow and declined by 0.4 per cent in September and are up by 2.9 per cent over the year.”
Strong population growth means that the working-age population is increasing by around 56,000 people per month which is very high (before the pandemic it was averaging approximately 30,000).
“This means that to keep the unemployment rate unchanged, job growth needs to be rising by ~37K people every month. This also assumes that the participation rate (the share of the labour force either employed or looking for work is unchanged,” she said.
“However as we saw in the September data, large changes in the participation rate mean that changes in the unemployment rate may look odd relative to the employment changes.
“In September, despite the low level of jobs growth, the unemployment rate declined to 3.6 per cent (from 3.7 per cent last month) because the participation rate fell 0.3 percentage points from 67 per cent to 66.7 per cent. If the participation rate remained unchanged 67 per cent in September (rather than declining) then the unemployment rate would have risen to 3.9 per cent.”
AMP predicts there will be further deterioration in labour market conditions and a rise in the unemployment rate from here based on leading indicators of job growth like job advertisements, job vacancies, business hiring intentions and applicants per advertised job, said Ms Mousina.
“However, the slower-than-expected slowing in jobs growth does mean some upside risks for near-term wage growth which could concern the Reserve Bank of Australia,” she said.
BDO Economics partner Anders Magnusson agreed that the latest data indicates the labour market is softening despite the decrease in the unemployment rate, reducing the risks of services inflation from wage increases and demand-driven inflation.
“The increasing trend in underemployment rate means that people want to work more hours than employers are willing to offer. The continuing steep decline in job vacancies also points to a softening labour market,” said Mr Magnusson.
This data release should give the RBA comfort to continue holding the cash rate, he said.
“There are supply-side inflation risks from ongoing conflict overseas but increasing the cash rate is not the ideal way to mitigate this type of inflation. While it would put downward pressure on inflation, it would do so by doubling down on the deteriorating financial situation of mortgage-holding households,” said Mr Magnusson.
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