Australia’s jobless rate rose last month to 3.5%, as more people sought work and the economy added jobs, even as rising interest rates squeezed finances for households and businesses.
Labour market data released by the Australian Bureau of Statistics on Thursday showed the economy added about 33,500 positions in August. The participation rate, which tracks the proportion of people looking for work, rose to 66.6%.
Putting some context to the minor rise in the jobless rate to 3.5% last month. (Source: ABS) pic.twitter.com/kXrIE2Tan5
— Peter Hannam (@p_hannam) September 15, 2022
The jobs figures are closely watched by economists as a sign of how strong the economy is and whether the interest rate rises by the Reserve Bank so far are having much effect to cool demand.
The economy added 58,800 full-time positions while shedding 25,300 part-time roles, the ABS said. At 3.5%, the jobless rate was marginally higher than the 3.4% rate reported for July, and remains close to the lowest since 1974.
The participation rate edged up 0.2 percentage points on July’s numbers and is now just shy of June’s record high of 66.8%.
The participation rate bounced back a bit last month to 66.6% and remains close to record highs. (Source: ABS) pic.twitter.com/rY0e2SYOW4
— Peter Hannam (@p_hannam) September 15, 2022
Among the states and territories, the ACT had the lowest jobless rate at 2.7%, ahead of Western Australia’s 3.1%. New South Wales, at about a third of the economy, had an unemployment rate of 3.4% while Victoria – which goes to the polls in just over 10 weeks’ time – posted a 3.7% rate.
Also pointing to strength in the economy was the 0.8% rise in hours worked last month to 1.85bn, reversing in full the drop in July, according to the head of labour statistics at the ABS, Lauren Ford.
“The August rise in employment and hours occurred after the winter school holidays and flooding events in NSW, where we saw more people than usual working fewer hours in July,” Ford said.
But she said “the number of people working reduced hours due to being sick remained elevated in August, at around 760,000 people,” or about double the number at the end of a typical winter.
The Australian dollar and the ASX 200 rose after the data release. Catherine Birch, a senior economist at ANZ, said the “overall solid labour market report” added to other recent data such as a strong NAB business survey to boost the case for another 50 basis point increase by the RBA at its 4 October board meeting.
“Despite the slight increase in August, we continue to expect the unemployment rate to fall into the high-2s by early 2023,” Birch said, noting that leading indicators pointed “to solid employment growth over the remainder of this year”.
These include the ANZ’s job ads survey picking up 2% in August to beat its previous peak in March, while a Westpac-Melbourne Institute gauge of consumer sentiment this month showed more respondents expect the jobless rate to fall rather than rise over the coming 12 months, she said.
KPMG’s chief economist,Brendan Rynne, said “the continued strength in the labour market suggests the RBA will maintain its tightening bias to the cash rate in next month’s meeting.”
“The question remains whether the RBA will start to ease off on the size of the rate jumps and revert back to 25 basis point or whether it will continue with double jumps of 50 basis points, in line with the aggressive approach of the US Federal Reserve,” he said.
CBA economists have estimated higher interest rates can take as long as three months to have an effect. The RBA’s increase in its cash rate of 2.25 percentage points so far is already the fastest ramp up of borrowing costs since 1994.
One challenge for forecasts is the timing of the next big economic data points. The ABS won’t release the September quarter consumer price inflation figures until 26 October – or well after the next RBA board meeting on 4 October.
Its wage price index for that quarter won’t land until 16 November.
