Labour market showing signs of easing: Economists

Australia’s unemployment rate rose to 3.7 per cent (in seasonally adjusted terms) during July 2023, decreasing to 14,026,700, according to the latest Labour Force data released by the Australian Bureau of Statistics (ABS).

In trend terms, the unemployment rate remained at 3.6 per cent, with employment increasing to 14,056,100.

ABS head of labour statistics Bjorn Jarvis said: “The fall in employment follows an average monthly increase of around 42,000 people during the first half of this year. Employment is still around 387,000 people higher than last July.

“July includes the school holidays, and we continue to see some changes around when people take their leave and start or leave a job.

“It’s important to consider this when looking at month-to-month changes, compared with the usual seasonal pattern. The only other fall in employment in 2023 was in April, which also included school holidays.”

Unemployment increased by 36,000 during the month, reaching 541,000, however, this was still approximately 172,000 lower than before the COVID-19 pandemic.

Furthermore, the employment-to-population ratio dropped from 64.5 per cent to 64.3 per cent.

“Despite these falls, both indicators were still well above pre-pandemic levels and close to their historical highs in May,” Mr Jarvis further stated.

ANZ head of economics Adam Boyton said while the results were weaker than what the major bank had expected, the “softness in the data fits neatly” with the sentiment shown in the Reserve Bank of Australia’s (RBA) August minutes.

The RBA noted twice that the labour market could be reaching “a turning point”, with the board forecasting the unemployment rate to reach 4.5 per cent by late 2024.

The signs of a weakening labour market factored into the RBA’s decision to hold the official cash rate at 4.1 per cent during the August monetary policy meeting, along with signs that inflation was “heading in the right direction” to the target of 2–3 per cent.

“That said, given the volatility in the monthly Labour Force survey it will take more than one month’s data to prove that point,” Mr Boyton added.

“In that vein we note that the unemployment rate printed at 3.7 per cent in January and April, only to fall back again in subsequent months.”

CreditorWatch chief economist Anneke Thompson said the country’s unemployment rate remains “low by historic standards”.

“But there are clear signs now that more weakness in the labour force can be expected, given the deteriorating economic conditions, led by very weak consumer demand,” Ms Thompson said.

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