Labour Market Easing But Impacted By Summer Holidays

The January labour data came in weaker-than-expected and showed the more convincing signs that the labour market is easing, but the ABS has some holiday-related caveats. Employment grew 0.5k and the unemployment rate rose 0.15pp to 4.1%, the highest in two years and close to the RBA’s Q2 2024 forecast of 4.2%. This data is likely to confirm that the RBA is on hold for now but services inflation will need to show significant moderation as it is delaying the return to target.

• The increase in the unemployment rate was driven by a 22.3k increase in the number of unemployed in February as job creation couldn’t cover the 22.8k people who entered the labour force. The 12 month increase in unemployed was relatively stable though at +77.9k up from +77.1k in December.
• The unemployment rate was a low 4.1% coming in at 4.058%. The ABS also noted that January 2024 was impacted by a “higher-than-usual number of people” not employed saying they will start a job in the next 4 weeks as was the case in 2023 and this may be the start of a new seasonal trend. This makes the February data released on March 21 key to determining labour market strength.

• Both full-time and part-time employment was soft with full-time jobs (FT) rising only 11.1k and part-time (PT) shrinking 10.6k. 3-month momentum deteriorated across the board but remains positive for the total and PT.
• Employment growth is now at 2.6% y/y down from 3.2% y/y in early Q4 and is now below both labour force (3.0%) and working age population growth (2.9%), implying unemployment may rise further.
• To add to the generally softer tone of the report, hours worked fell 2.5% m/m to be up only 0.7% y/y, the lowest in 4 years ex Covid, with FT down 2.9% m/m and -7.8% y/y, but this data was impacted by holiday leave.