Australian employment surprised expectations falling modestly in March (-6.6k), lifting the unemployment rate from 3.7% to 3.8%. Overall, however, the unemployment rate remains low and employment lifted strongly in the March quarter, indicating that the resilience in the labour market continued as growth remained subdued in early 2024.
By the numbers | March
- Employment fell by a net 6.6k in March, missing expectations for a rise of around 7k following the surge seen in February (117.6k). Backward revisions subtracted 3k from employment over January and February.
- The unemployment rate rose by less than expected printing at 3.8% (vs 3.9% forecast) from 3.7% in February. A decline in the underemployment rate from 6.6% to 6.5% held total underutilisation at 10.3%.
- A seasonal boost to the labour supply in February did not continue in March as the participation rate fell back to 66.6% from 66.7%.
- Hours worked rose by 0.9% month-on-month, increasing by 1.7% over the year.
The details | February
A modest 6.6k net fall in employment (full time +27.9k and part time -34.5k) in March saw the unemployment rate reverse some of its sharp decline in the prior month, lifting from 3.7% to 3.8%. This completed a sequence of volatile employment outcomes in the opening quarter of the year: January 11.2k, February 117.6k and March -6.6k, reflecting shifts in hiring patterns in the post-pandemic labour market. Market expectations were for a small rise in employment (7.2k) and my view was that there were upside risks to that figure. In the event, however, these expectations fell on the wrong side of the volatility. Nonetheless, the more important point is that the underlying pace of employment remains solid. Overall in Q1, employment lifted by 122.3k - its strongest quarterly increase in a year - averaging a robust gain of 40.8k per month.
After falling to a 5-month low in February (3.7%), the weak employment outcome in March saw the unemployment rate ticking back up to 3.8%. This increase, however, was moderated by a decline in the participation rate from 66.7% to 66.6%, remaining just below the late 2023 record high (67%). Despite unemployment rising, the broader underemployment rate (combining unemployed workers and those employed but wanting additional hours) fell from 6.6% to 6.5%, its lowest since last October. Around these offsetting movements in the unemployment and underemployment rates, the total labour underutilisation rate remained at 10.3%, down slightly on the levels seen either side of the turn of the year.
Hours worked were reported to have lifted by 0.9% in the month, with gains coming through across both the full time (1%) and part time segments (0.5%). As with the employment outcomes, changes in hours worked were volatile month-to-month in Q1: January -1.9%, February 2.9% and March 0.9%. On a quarterly basis, hours worked were flat; however, that was an improvement the 0.5% fall in the final quarter of last year.
In summary | March
March's report contained more volatility but the underlying theme is that the Australian labour market remains in robust shape. Conditions have eased from peak levels of tightness, but that is in the context of a notable slowdown in economic growth through 2023. Momentum in employment remains solid and indicators of labour demand suggest that hiring will continue. There looks to be little in today's report that would prompt the RBA to reassess its view on the labour market.
