Australia's unemployment rate lifted to 3.7% in April as employment fell unexpectedly. Today's report came against the run of play from the first quarter of the year where a reacceleration in employment held the unemployment rate close to cycle lows amid rapid post-Covid population growth. My interpretation is that seasonal effects around the Easter holiday period have been at play in today's report.
Labour Force Survey — April | By the numbers
- Employment fell (on net) by 4.3k in April, well below the median estimate (25k) and weaker than the most pessimistic forecast (0k) in the survey of economists' estimates. March's employment outcome was revised up to 61.1k from 53k reported initially.
- National unemployment rate rose from 3.5% to 3.7% (vs 3.5% expected). The underemployment rate declined from 6.2% to 6.1%, leaving underutilisation little changed around 9.8%.
- Labour force participation declined from record highs in March at 66.8% to 66.7% in April.
- Hours worked accelerated by 2.9% in the month, despite weaker labour market conditions and the Easter holiday period falling in the middle of the reference period.
Labour Force Survey — April | The details
April's labour force report was soft across the key details. Employment fell resulting in a rise in unemployment, which came alongside lower labour force participation. As highlighted in my preview, the Easter holiday period fell during the reference period for the April survey, so today's report shaped as a bit of a wildcard. In the event, the report has come in weak relative to expectations and compared to recent months.
Headline employment fell by 4.3k in April, the net result of a 27.1k fall in full time employment and a 22.8k rise in part time employment. This was the weakest outcome for employment since December last year (-7.7k). However, employment in prior months was revised higher in today's report. Employment in the first quarter of the year was revised up by around 11k to 117k, the strongest quarterly rise since Q2 2022.
After incorporating the upward revisions and the weak outcome for April, momentum in employment still remains solid. The 3-month average pace of employment was 36.1k, while on a 3-month annualised basis employment growth is around 3.2%.
The unemployment rate lifted from 3.5% to 3.7%, returning to its level at the start of the year. While inward migration is increasing at a rapid pace, the labour force recorded its slowest increase (14.1k) in 4 months, well down from an average of almost 41k per month in Q1. This saw the participation rate ease from record highs in March (66.8%) to 66.7% in April.
Whereas unemployment rose in April, underemployment fell (6.2% to 6.1%) and total underutilisation was broadly unchanged at 9.8%. That combination of outcomes is unusual. A key factor in this may have been that total hours worked were reported to have surged by 2.6% in April.
Rising hours came despite falling employment (and higher unemployment). It also came with around 5.1 million Australians on annual leave over Easter. The ABS explained in the release that in 2015 - when Easter fell at a similar time to 2023 - more people took annual leave back then (5.2 million) than they did this year.
Labour Force Survey — April | Insights
Overall a messy report today and one which is difficult to draw many conclusions from. Taken with an underwhelming rise in wages growth in Q1 reported yesterday (see here), the RBA may revert to a pause in June as it did in April when it elected to wait for more data to "... assess the state of the economy and the outlook, in an environment of considerable uncertainty." But after the surprise decision earlier this month to start hiking again, it is difficult to be confident in predicting how the Board may have read this week's labour market data.
