Australia's labour force survey for February is due to be published by the ABS at 11:30am (AEDT) today. After overcoming the peak of the Omicron wave and with people returning to work from extended summer holidays, activity in the labour market rebounded strongly in February. The key focus now turns to the accumulation of pressure on wages from a tightening labour market.
As it stands | Labour Force Survey
The surge of the Omicron variant amid the summer holiday period disrupted the momentum in the labour market in January. Around 5.2 million Australians were away from work due to Covid isolation requirements or from annual leave early in the new year, with hours worked crunched by 8.8% in January, collapsing to 6% below their pre-pandemic level in the process.
The avoidance of lockdowns due to high vaccination rates and a focus on retaining staff in a tight labour market meant that employment held up far better than in earlier waves of the pandemic. Employment lifted by 12.9k on net and was 2% above pre-pandemic levels. Part-time employment advanced by 30k, more than offsetting a 17k fall in the full-time segment.
Despite the disruptions in the month, the participation rate lifted slightly to 66.2% and remained around record highs. With the rise in participation largely being met by increased employment, the unemployment rate held steady at 4.2%. In the context of the large fall in hours worked, underemployment and overall underutilisation drifted only marginally higher to 6.7% and 10.9% respectively.
Market expectations | Labour Force Survey
Conditions are expected to rebound as the peak of the Omicron wave rolled over and people returned to work from holidays. Employment on the median estimate is forecast to rise by 37k, with the range of estimates sitting between 5k and 60k. A strong rise in the ABS's weekly payrolls data over the reference period for the February survey suggests the risks are to the upside.
The unemployment rate is forecast to tick lower to 4.1% (range: 4% to 4.3%) alongside a likely rise in the participation rate from 66.2% as isolation requirements were eased and elevated job vacancies encouraged more Australians into the labour force.
What to watch | Labour Force Survey
Given the focus on labour costs from the perspective of the RBA, the measures of unemployment and broader underutilisation in the labour market will be closely watched today. Australia's unemployment rate has not been in the low 4s since prior to the global financial crisis and there is uncertainty over the responsiveness of upward pressure on wages from a tightening labour market. Hours worked will rebound after the disruptions from earlier in the year and could also be boosted by people working more hours with many businesses continuing to report staff shortages within their current operations.
