Australian employment was weaker than expected in September, reflecting the Reserve Bank’s assessment that the labor market has reached a “tipping point”while fewer people looking for work lowered the unemployment rate.
The economy added 6,700 jobs from the previous month, driven mainly by part-time jobs, well below estimates of an increase of 20,000 and the participation rate fell from 67% to 66.7%, Australian Bureau of Statistics data showed on Thursday. The unemployment rate fell to 3.6%, after having fluctuated between 3.4% and 3.7% since June of last year.
The data is consistent with the RBA’s recent assessment that the labor market is starting to cool in response to higher interest rates. New Gov. Michele Bullock this week highlighted a number of obstacles to cooling inflationary pressures, including low unemployment.
The weaker-than-expected data gave traders pause to ponder the RBA’s next move: Policy-sensitive three-year yields pared an earlier rise and the Australian dollar extended a decline to trade 0.4% weaker.
“There was enough information about the workforce for the RBA to conclude that there is still tension in the labor market and that will support wage growth“said Alex Joiner, chief economist at IFM Investors in Melbourne.
“Next week’s CPI data is crucial and, as Governor Bullock stressed in her comments this weekthe bank has a very low tolerance for any upward surprise in inflation,” he said.
The RBA kept rates at 4.1% for the fourth consecutive month in October and economists and money markets are divided over the outlook. The former expect a further rise up to 4.35% starting in Novemberwhile traders suggest rates have already peaked as inflation appears to be heading in the right direction.
Thursday’s figures showed annual job growth fell 2.9% from 3.1% at the start of the year. Economists expect the pace of gains to slow further and the unemployment rate is expected to rise to 4.5% next year.
“The drop in the unemployment rate in September primarily reflected a higher proportion of people moving from being unemployed to not being in the labor force“said Kate Lamb, head of labor statistics at the ABS. “Demand for workers has fallen slightly, but the labor market remains relatively tight and resilient.”
The labor data also showed: Underemployment fell to 6.4% and underutilization fell to 9.9%
Full-time positions fell by 39,900, while part-time workers increased by 46,500. The employment-population ratio decreased to 64.4%.
The figures support expectations that Australia will avoid the type of wage-price spiral seen in many developed economies, with annual wage gains currently at 3.6% and expected to peak at around 4%.