NAB Expect The Labour Market To Continue To Demonstrate Little Spare Capacity

Ahead of today’s labour market report NAB write “December employment data is expected to confirm a still strong labour market. We pencil in employment growth of 25K. Employment growth at that pace is the rate required to keep the unemployment and participation rates stable given current estimates of population growth.”

• “We see the unemployment rate holding again at its 48-year low of 3.4%. though we note the bar to a tick higher to 3.5% is low given the November number was 3.448 unrounded following a surge in participation in the month.”
• “The sharp recovery in population growth is supporting some easing in labour shortages. The return of international students and working holiday makers and the renewed inflow of skilled migrants is easing some of the compositional mismatch between supply and demand for labour that had contributed to the most acute labour shortages. That’s consistent with the rapid retreat in SEEK Job Ads, which are now over 20% off their May peaks.”
• “But the overall labour demand backdrop remains robust, and we expect the labour market to continue to demonstrate little spare capacity in the near term before a shallow lift in the unemployment rate through the second half of 2023 to 4%.”