Prospects of a February interest rate cut have taken a tumble after a surprise dip in Australia’s unemployment rate.
The jobless rate fell from 4.1 per cent to 3.9 per cent in November, the Australian Bureau of Statistics reported on Thursday, defying expectations of a 0.1 percentage point rise.
Approximately 35,600 jobs were added to the economy – well above market forecasts of a 25,000 gain.
“In November we saw a higher than usual number of people moving into employment who were unemployed and waiting to start work in October,” ABS head of labour statistics David Taylor said on Thursday.
“This contributed to the rise in employment and fall in unemployment.”
It’s the first time the unemployment rate has had a three in front of it since March.
The surprise result set back expectations of the Reserve Bank of Australia cutting interest rates at its next board meeting, with the money market implying a 55 per cent chance of a February cut, down from 68 per cent.
RBA governor Michele Bullock has cited the ongoing strength in the jobs market as a reason why Australia has lagged comparable nations in beginning its monetary easing cycle.
Thursday’s figures further bolstered that argument.
The unemployment rate for the fourth quarter is averaging 4.0 per cent, below the central bank’s forecast of 4.3 per cent in its November statement on monetary policy.
While the strong labour market isn’t driving inflation higher, it should challenge the RBA’s degree of confidence in its path back to target, said NAB head of markets economics Tapas Strickland.
Even though he predicts the December quarter consumer price index to print below the RBA’s forecast, Mr Strickland does not expect it to begin cutting rates until May.
The participation rate – the percentage of people either employed or looking for work – dropped 0.1 per cent to 67 per cent, still near record highs.
“Despite the fall, the participation rate was the same as a year ago, and 1.5 percentage points higher than March 2020,” Mr Taylor said.
Treasurer Jim Chalmers cheered the strong employment figures as proof the government’s policies were working.
“Today’s new jobs numbers show unemployment is falling while wages are rising, inflation is moderating, and our policies are helping achieve a soft landing in our economy,” he said.
Underemployment fell 0.1 percentage points to 6.1 per cent, meaning fewer employed people were wanting and able to work more hours.
Full-time jobs increased 52,600, while part-time employment decreased by 17,000, meaning full-time jobs in Australia were at a record high, noted Employment Minister Murray Watt.
“We’re also seeing record full-time employment of Australian women,” Mr Watt said.
Strong public sector spending is inflating the labour market and masking weakness in the private sector, with industries with high concentrations of female workers such as health care leading the way for jobs growth.
But the jobs figures masked real pain being felt by Australians who have seen their living standards decline, Shadow Treasurer Angus Taylor said.
Real disposable income per capita has fallen more than 10 per cent since Labor took office in May 2022.
“The spike in taxpayer funded jobs is now coming at the expense of growth in the private sector,” Mr Taylor said.
“Labor’s bloated bureaucracy is out of control.
“Australia needs a strong private sector to have a strong economy.”
