Australia's monthly update on the labour market for May is due from the ABS at 1130 today. Employment rediscovered form in April surging by 89k to keep the unemployment rate in check at 4.1% as labour force participation (67.1%) returned to near record highs. The RBA still went onto to cut its cash rate by 25bps to 3.85% in late May and signalled a willingness to go further. A cut in early July firmed in market pricing to a roughly 3 in 4 chance after GDP growth slowed sharply to just 0.2% in the March quarter. Today's report would likely have to surprise strongly to the upside again to move the dial.
May preview: Employment expected to moderate
A moderate increase in employment of 20k in May is expected in today's report following April's monumental upside surprise print (89k). The unemployment rate is seen holding at 4.1% (range: 4.1% to 4.2%), based on the participation rate remaining at 67.1%. After returning to near record highs last month, it will be interesting to see if participation has lifted further. If it has, and employment moderates as expected, there could be some upside risk to the unemployment rate.
Volatility within the dataset appears to be more elevated at present. Factors that have likely played a role here have been a large increase in retirements at the start of the year and the disruptions caused by Cyclone Alfred in March. A wildcard in May could be the federal election. Following past elections, the ABS has sometimes identified a noticeable impact on employment from the temporary hiring of polling officials. Any such effect would likely be highlighted in the media release accompanying today's report.
April recap: Resurgent employment rises to 14-month high
Employment surged to its strongest increase since February last year rising by 89k in April, well above the 22.5k lift expected. This followed outcomes that missed expectations in February (-56.3k) and March (36.4k). April's gain was driven by full-time employment (59.5k) with the part-time segment playing a supporting role (29.5k).
On the strength of the rise in employment, the national unemployment rate remained unchanged at 4.1%, even as the labour force participation rate accelerated from 66.8% to 67.1%, returning to near record highs. However, there was a slight increase in underemployment (5.9% to 6%) and total labour force underutilisation (9.9% to 10.1%) following a soft outcome for hours worked.
Hours worked showed no change in April from the previous month (0%), though annual growth firmed to a 1.1% pace from 0.7% previously. The flat outcome for hours worked is surprising given the rise in employment (0.6%), but it could set the stage for hours worked to pick up in the months ahead.
