The ABS is due to publish Australia's Labour Force Survey for May at 11:30am (AEST) today. With the RBA stepping up the pace of withdrawing policy support, further signs of tightening in the labour market strengthen the likelihood of a second consecutive 50bps rate hike at the July meeting.
As it stands | Labour Force Survey
Australia's unemployment rate stands at a 48-year low of 3.9%. This has been a remarkable recovery from the height of the pandemic crisis when the unemployment rate climbed to 7.5% during the national lockdown, a level not seen since the late 1990s. Underemployment (6.1%) and underutilisation (10%) are at their lowest levels since 2008. The recovery in the labour market has been accompanied by increases in employment and participation to record highs.
April employment slowed to a 4k rise around broadly offsetting contributions from the full time (92.4k) and part time segments (-88.4k). The fall in part time employment may have been partly related to Easter and school holiday periods, though it is also likely to be reflecting a 'switching' to full time employment from people working increased hours (to 35 hours or more in the reference week) as many businesses continue to face staff shortages in a tightening labor market and with Covid-related absences still at high levels. The flood recovery effort in New South Wales and Queensland could also be adding to these frictions.
Hours worked lifted by 1.3% in April, more than rebounding from their fall in March (-0.3%) when staff absences from Omicron and severe wet weather on the east coast caused major disruptions. In April, full time hours advanced by 2.2% as part time hours declined by 2.2%. Participation in the labour force eased from 66.4% to 66.3% but remained around record highs.
Market expectations | Labour Force Survey
For today's report, the median estimate for employment is an increase of 25k (range: 0-40k). The latest payrolls data indicated employment slowed over the second half of April through the Easter and school holiday period before starting to rise in May. Overall, the risks look to be to the downside for the employment number. The market expects the unemployment rate to decline further, to 3.8% in May from 3.9% in April (range: 3.8% to 4%).
What to watch | Labour Force Survey
The focus remains on the unemployment rate and the broader measures of underutilisation. Last week's decision by the RBA to hike rates by 50bps referenced domestic capacity constraints and the tightening labour market as factors "contributing to the upward pressure on prices". Should the unemployment rate fall to 3.8% as expected, it would strengthen the case for the RBA to hike rates again by 50bps in July.
