According to data released on Thursday, Australian employment increased more than anticipated in April, yet the unemployment rate rose to a three-month high as workforce growth outpaced job creation.
The Reserve Bank of Australia (RBA) was previously expected to raise interest rates again, but the increase in unemployment has significantly reduced that likelihood from as high as 40% earlier in the month. Market sentiment now suggests a roughly 54% chance of a cash rate cut as early as December, buoyed by a slowdown in U.S. inflation and renewed hopes for policy easing there.
The Australian Bureau of Statistics reported that net employment rose by 38,500 in April, surpassing the anticipated 23,700 increase. This growth was entirely in part-time employment, which offset a decrease of 6,100 in full-time employment. The unemployment rate climbed to 4.1%, up from an upwardly revised 3.9%, exceeding market expectations. The participation rate slightly increased to 66.7%, while hours worked remained unchanged.
Bjorn Jarvis, head of labor statistics at ABS, noted, “A 30,000 people increase in unemployment reflected more people without jobs available and looking for work, and also more people than usual indicating that they had a job that they were waiting to start in.”
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This suggests that employment could rise in May as these workers begin their jobs, potentially reducing unemployment. Despite this, the employment-to-population ratio remained steady at 64.0% in April, indicating that job growth is just keeping pace with the rapid population increase. “This suggests that the labor market remains tight, though less tight than late 2022 and early 2023,” said Jarvis.
The RBA is cautious about prematurely raising interest rates, as it had expected unemployment to gradually rise to 4.2% by the end of the year due to employment lagging behind labor force growth. Current rates, already at a 12-year high, are heavily burdening borrowers.
Despite unexpectedly high annual inflation of 3.6% in the first quarter, signs indicate easing pressures due to low consumer demand and declining wages. Recent data showed private sector growth fell for the first time since late 2020, and wage growth slowed to an annual 4.1% in the March quarter. Additionally, the Australian Labor government has announced energy and rent rebates aimed at reducing consumer price inflation by at least half a percentage point over the next year.
