Australia's first labour force survey for 2023 is due to be published by the ABS later this morning (11:30am AEDT). Employment is expected to open the year with a 20k rise and reverse the surprise decline reported in December. The unemployment rate is on the lows for the cycle and is at levels not seen since the 1970s. Labour force participation has surged to record highs coming out of the pandemic, a factor that has likely contributed to the slower rise in wages growth in Australia than has been seen in other countries.
As it stands | Labour Force Survey
Employment surprised in December posting a 14.6k decline (vs 22.5k expected), its weakest result since July. The weakness centred on part time employment (-32.2k) as full time employment continued to rise (17.6k). December's decline came after strong rises in October (43.7k) and November (58.3k), resulting in employment rising by almost 90k in the final quarter of the year as the pace reaccelerated after slowing in Q3 (37.8k).
Although employment declined, the unemployment rate remained unchanged from the prior month at 3.5%. This was due to the participation rate falling by 0.2ppt to 66.6%. Overall, though, Australia's unemployment rate remains around 50-year lows at a time when the participation rate is around its highest levels on record. There were modest rises in both the nation's underemployment (6.1% from 5.8%) and underutilisation rates (9.6% from 9.3%) in December, likely resulting from the fall in part time employment.
Hours worked declined in December (-0.5%) on renewed Covid-related disruptions. The number of Australians working reduced hours because of illness lifted to its highest level since the winter months at over 600k. While Covid is still posing problems from time to time, the effects of the pandemic on the economy eased over the course of 2022 as restrictions were phased out. Hours worked incresed by 3.2% over the year, to now be almost 7% higher than pre-pandemic levels.
Market expectations | Labour Force Survey
The market anticipates employment to rise by 20k according to the median estimate in the Bloomberg survey; however, conviction appears low given the wide range of forecasts (-5k to 45k). The unemployment rate is expected to hold steady at 3.5%.
What to watch | Labour Force Survey
Assessing where the risks are skewed going into today's report is difficult as January always has the potential to be a wildcard month for employment. There is also no steer coming from the high-frequency payrolls data after the ABS suspended the series late last year. In any case, the ratcheting up in hawkish messaging from the RBA at its meeting earlier in the month has been absorbed with markets pricing in a string of further hikes to a peak rate above 4% by the middle of the year. Markets may see a solid report today as validating this pricing, though data on wages growth due out next week could prove to be a more decisive factor.
