Unemployment rate holds steady at 3.7%: ABS

The latest Labour Force data released by the Australian Bureau of Statistics (ABS) has revealed that the unemployment rate remained at 3.7 per cent in August in seasonally adjusted terms.

The number of people employed increased by 64,900 workers, bringing the total labour force size to 14,107,900.

ABS head of labour statistics Bjorn Jarvis said August’s large increase in employment followed a small drop in July around the school holiday period.

Looking over the past two months, the average employment growth was around 32,000 people per month, which is similar to the average growth over the past year.

“The employment-to-population ratio rose 0.1 percentage point to 64.5 per cent, around the record high in June.

“The participation rate also increased, up to a record high of 67.0 per cent in August, which, together with the high employment-to-population ratio, continues to reflect a tight labour market,” Mr Jarvis said.

Commonwealth Bank of Australia (CBA) senior economist Belinda Allen said the August labour force survey revealed a rebound in employment, as the major bank expected.

Additionally, the 64,900 rise in employment was stronger than CBA’s estimate of 25,000.

Ms Allen attributed “two main drivers” to the rising participation rate: the strong net overseas migration, which returned figures higher than the forecasts contained in the May budget, and cost-of-living pressures with a tight labour market.

“As a result, [approximately] 35,000 jobs need to be added each month to keep the unemployment rate steady.

“We calculate this number based on the current participation rate and working-age population growth. This is becoming more challenging each month as demand for labour slows,” Ms Allen said.

Ms Allen added that CBA expects the unemployment rate to reach 4.25 per cent by the end of this year and 4.5 per cent by mid-2024.

The increase in employment surpassed Westpac’s expectations as well, with the major bank pencilling in a growth of 40,000 for the month, Westpac associate Ryan Wells stated.

“We argued that risks to our forecast were skewed to the upside given there has been a sequence of volatility in the data – this time more directly associated with school holidays in July,” Mr Wells said.

Mr Wells noted the strength in full-time employment over the past year, which rose by 7.7 per cent annually, exceeding that of part-time employment (up 1.9 per cent annually).

“This has, in turn, seen considerable strength in seasonally adjusted hours worked over the past year (+9.4 per cent/yr), to an extent that has outstripped the gains in overall employment (+5.9 per cent/yr).

“The August Labour Force Survey certainly provided some surprises, but generally speaking, it remains consistent with our broader labour market view,” Mr Wells said.

ANZ head of Australian economics Adam Boyton said the moderation in gross domestic product (GDP) growth suggested that job growth “should ease over the rest of the year”.

“The risks around that view could be starting to become more skewed to a stronger labour market, however,” he added.

“The recent increases in ANZ-Indeed Job Ads, the lift in forward orders in the NAB Business Survey from the low in May and a stabilisation in consumers unemployment expectations has left our labour market indicator flagging only a very slow trend drift higher in the unemployment rate.”

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