Reporter's view: Jobs market suggests the 'narrow path' is possible
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Reporter's view: Economics correspondent Jennifer Duke writes: "The biggest surprise from the labour force data today is that it's pretty unsurprising. This is the first dataset we've seen for a while that matched the economic consensus.
"It's telling us that the jobs market remains relatively resilient at the same time as the economy slows. And this bodes well for the Reserve Bank's challenge of navigating the so-called 'narrow path' or 'soft-landing' where unemployment edges upwards and inflation comes back down. In other words, getting inflation back to the 2% to 3% target without crashing the economy and without causing more job losses and pain for the public than necessary.
"Another interesting feature pointed out by several economists this time round, including Moody's Analytics, is a shift in employer behaviour. Rather than cutting staff and undertaking waves of redundancies, instead employers are cutting back hours and tempering hiring plans. That's making it harder for the unemployed to get re-hired (especially younger Australians entering the job market) but it means that existing employees are holding onto their jobs more than they might've in previous downturns.
"All that being said, economists are widely saying that the labour market is continuing to cool. In fact, it may well be cooling faster than previous cycles. State Street Global Advisors notes that the annual growth in full-time non-seasonally adjusted employment is 85.2% down from its peak in October 2022, which is larger than the average fall of the nine previous cycles. The unemployment rate is expected to keep climbing over the rest of the year."
Unemployment hits 4% in line with expectations
The news: The unemployment rate fell to 4% in May, in line with forecasts for a 0.1% decline in joblessness, following a spike last month. However, trend unemployment ticked up to 4% from 3.9% in April.
The numbers: Employment increased by 40,000 people over May and unemployment fell by 9,000 people.
Monthly hours worked dipped 0.5% on a seasonally adjusted basis. This was partly due to more people than usual calling in sick, with 4.2% working fewer hours as a result of illness. The sickness rate compares with 3.5% for a pre-pandemic May average.
Underemployment was steady at 6.7% and underutilisation remained at 10.7%.
The context: The result is more a quirk in the May dataset than any rise in strength over the month. There was a 33,000 increase in the number of unemployed people in April but this only improved by 9,000 in May.
As such, 24,000 more people remain out of work than in March. This is still a solid result compared to pre-pandemic norms and both employment-to-population ratios and participation rates are higher than before Covid, with the Australian Bureau of Statistics characterising the labour market as still “relatively tight”.
What they said: “In April we saw more unemployed people than usual waiting to start work. Some of the fall in unemployment and rise in employment in May reflects these people starting or returning to their jobs,” ABS head of labour statistics Bjorn Jarvis said.
The source: Australian Bureau of Statistics
