Labour market showing signs of easing: ABS

The unemployment rate rose by 0.1 per cent to 3.8 per cent (seasonally adjusted) in March, according to the latest Labour Force data released by the Australian Bureau of Statistics (ABS).

The number of employed people fell by 6,600, down to 14,259,900 during March, while the number of unemployed people rose by 21,000. This followed a large increase of 117,600 employed people in February.

This slight increase in the unemployment rate followed a “larger-than-usual” flow of people entering employment during February after smaller-than-usual flows in December and January. According to the ABS, the flows into employment during March returned to “a more usual pattern”.

With this fall in employment coupled with the pace of growth in Australia’s population, the seasonally adjusted ratio dropped 0.2 percentage points to 64 per cent, while the participation rate declined 0.1 percentage points to 66.6 per cent.

However, ABS head of labour statistics Ben Jarvis said the labour market remained “relatively tight in March” as the employment-to-population ratio and participation still sit close to the record highs in November 2023.

“While they have both fallen by 0.4 percentage points since then, they continue to be much higher than their pre-pandemic levels,” Jarvis added.

ANZ senior economist Blair Chapman noted that although the labour market has shown slight signs of easing, it “may be running slightly hotter” than the Reserve Bank of Australia’s (RBA) forecast at the time of the February Statement on Monetary Policy.

“The RBA was forecasting employment growth to slow to 2.0 per cent y/y and the unemployment rate to reach 4.2 per cent by the end of the June quarter this year,” Chapman said.

“For that to be realised, employment needs to fall slightly in the June quarter and the unemployment rate to increase faster than it has over recent months.”

CreditorWatch chief economist Anneke Thompson commented on the data: “What this means is that while employment growth has been strong, it has really kept pace with population growth throughout the last few months.

“[T]here is some softening in labour force conditions, although it can be considered very minor, and the market is still tight by historic standards.”

Gareth Aird, head of Australian economics at the Commonwealth Bank of Australia (CBA), said the official labour market data has been “incredibly choppy over the last six months”.

“There have been much bigger swings than usual in the survey outcomes as the ABS has struggled to account for changing seasonal patterns around when people are both hired and commence work,” Aird said.

Aird added that the RBA board want to preserve “as many gains in employment as possible” while bringing inflation back to the 2–3 per cent target band.

“This means limiting the rise in unemployment beyond what is necessary to see inflation return to target,” Aird said.

[RELATED: Labour Force data could make for a cautious RBA]