Persistent Labour Market Tightness, RBA Meetings Remain “Live”

May employment was significantly stronger than expected at +75.9k after a 4k drop in April. It was driven by rises in both full-time (+61.7k) and part-time (+14.3k). The unemployment rate fell to 3.6% while the participation rate rose to 66.9%. This is strong data and signals that April weakness was not a new trend and that the labour market is very tight. So the RBA is likely to tighten further, especially given week’s survey inflation indicators.

• The unemployment rate fell to 3.551%, and so was almost 3.5%, from 3.68% in April – a drop of 0.13pp. The participation rate reached a new series high, which makes this unemployment result even more significant. The rate was driven down by strong jobs plus a 16.5k drop in the number of unemployed, which is now -6.4% y/y.
• In 2023 to date there have been 220k new jobs and employment growth is +3.4% y/y with full-time (FT) +4.1% y/y. 3-month momentum continues to rise for both the total and FT.
• Hours worked fell 1.8% m/m after rising for the three prior months and +2.7% m/m in April. They are +4.8% y/y and 3-momentum is very positive. The ABS noted that labour shortages are being partially met by employees working more hours.
• The only negative spot in the report was the rise in underemployment to its highest since February 2022 but at 6.4% remains historically low. Underutilisation rose to 10%, the third straight increase and the highest since April 2022.
• Population grew another 0.2% m/m to reach a new series high of 2.7% y/y but the employment-to-population ratio rose to a new record. Rising labour supply is helping with shortages and there still seems to be lots of jobs for immigrants, but housing is struggling to meet the demand.

Source: MNI - Market News/ABS

Australia underemployment rate vs underutilisation %

Source: MNI - Market News/ABS