In what has already been a heavy-duty week in Australia, January's Labour Force Survey is on the docket for 1130 (AEDT) today. On Tuesday, the RBA cut the cash rate by 25bps to 4.1% but expressed caution around easing further into a labour market showing signs of retightening. However, yesterday's update of the Wage Price Index for Q4 came in on the soft side of expectations, indicating inflationary pressures from the labour market have cooled. In today's report, employment strength is expected to moderate to a 20k increase, with the unemployment rate ticking up to 4.1%.
January preview: Strong momentum to flow into 2025?
The first Labour Force Survey for 2025 is expected to be a fairly subdued update. Employment is tipped to rise by 20k according to the median estimate in the Bloomberg survey, from a band of forecasts ranging between 5 to 40k. Alongside this, an uptick from 4.0% to 4.1% unemployment is expected (range: 4.0-4.1%), based on the participation rate remaining at record highs (67.1%).
Throughout 2024, employment outcomes consistently outperformed coming in topside of consensus in 8 of the 12 monthly reports. Strength through the back half of the year was notable as employment increased by 250k. The question today is whether the existing momentum continued in early 2025.
Employment gains are currently running at a 3-month average of around 32k - a run rate comfortably sustainable given the still-elevated levels of job vacancies. That the expectation is for a figure (20k) well below this pace points to caution around seasonality, with January traditionally a wildcard month. Looking back to last year, employment was soft in January, disappointing expectations on that occasion with a rise of just 2k (vs 28k forecast). I will side with the existing momentum and tip a 35k increase for January.
December recap: Labour market retightens over the back half of 2024
Employment surged by 56.3k in December, easily surpassing modest expectations for a 15k rise to close out 2024. While December's outcome was driven entirely by the part-time segment (80k) as full-time employment declined (-23.7k), the full-time segment led the way through 2024 accounting for two-thirds of the total increase in employment (444k).
The unemployment rate came in at 4.0% as expected, partly reversing the decline seen in November to an 8-month low of 3.9%. That came alongside a rise in the participation rate, returning to record highs of 67.1% from 67.0%. Overall, the main theme confirmed in the December report was that the labour market was retightening. Underemployment declined from 6.1% to 6.0%, down from a high of 6.7% earlier in the year in May. Similarly, the labour force underutilisation rate at 10.0% in December (unchanged from November) ended the year well below its recent high in May of 10.7%.
Rounding out a strong report, hours worked posted a 0.5% lift in December - the strongest month-on-month gain in 9 months. For the quarter, total hours advanced by 0.6%. Meanwhile, base effects saw annual growth accelerate from 2.1% to 3.2%, a 16-month high.
