The November job figures present an interesting conundrum for policymakers. The unemployment rate rose to 3.9% despite the addition of more than 60,000 jobs.
Unemployment to break 4% barrier
And there are predictions that this number could move past 4% in early 2024 – despite the RBA's forecast for unemployment reaching this level being set for mid-2025.
This increase in unemployment, the highest since May 2022, comes as the participation rate surged to a record high of 67.2%, with the proportion of Australians aged 15 and over either working or actively seeking work reaching an all-time high.
The rise in participation rate from 67% in October to 67.2% in November meant that the creation of some 61,500 jobs was insufficient to maintain a steady jobless rate. Underemployment also saw an uptick, rising 0.2 percentage points to 6.5%.
Meanwhile, financial markets are predicting that the Reserve Bank of Australia (RBA) will start to cut interest rates by June 2024.
Bjorn Jarvis, head of labour statistics at the Australian Bureau of Statistics (ABS), noted a slowdown in hours worked over the past six months, observing that the labour market was now less tight than it had been in the recent past.
Cost of living prompts participation
The increased participation can be sheeted home to the cost-of-living crisis with those able to work in households seeking additional income to cope with rising expenses. These pressures are unlikely to dissipate, even as wages overtake inflation.
Some analysts worry about the cooling economy’s capacity to absorb the increasing number of job seekers – both new migrants and people from the existing population looking for work.
The labour market's deterioration may prompt earlier interest rate cuts. IG's Tony Sycamore says current job numbers are unlikely to significantly alter the market's expectations of a rate cut timeline, with most economists forecasting the first cut in the RBA's cash rate towards the end of 2024.
“At first glance, the unemployment rate rising to 3.9%, further from its 3.4% low of October 2022 and above the RBA's forecast of 3.8% by year-end, brings an element of softness to today's jobs report,” Sycamore said.
“Before the jobs release and following this morning's dovish FOMC, the Australian interest rate market was looking for a first 25bp rate cut from the RBA in June 2024, with a second 25bp rate cut fully priced by November 2024.
“We don't see today's jobs numbers causing a drastic repricing of those expectations.”