The ABS is due to publish Australia's monthly Labour Force Survey for March today at 11:30am (AEST). With the economic expansion accelerating following the Delta setback, employment has surged over recent months driving a rapid tightening in the labour market. Going into today's report, the unemployment rate is on the verge of falling into the 3s and to its lowest since the 1970s.
As it stands | Labour Force Survey
The labour market continued to tighten in February as employment surged by 77.4k (consensus was for a 37k rise), with more tightening to come given the elevated level of job vacancies. The national unemployment rate fell to its lowest since 2008 after declining from 4.2% to 4.0%, while a rebound in hours worked (8.9%m/m) helped drive falls in underemployment (6.6%) and overall underutilisation (10.6%) to 14-year lows. Labour supply is responding to the tightening labour market, lifting for the 5th month running to print at a record high of 66.4%.
Employment has risen at pace since the Delta lockdowns, with February's outcome the 4th above-consensus result in succession. The 77.4k increase followed January's 28.3k rise, which was revised up from 12.9k despite coinciding with the peak of the Omicron wave. Full time employment accounted for all of February's increase (121.9k) as part time employment came off (-44.5k) after its recent surge. On a pre-Covid level comparison, total employment has risen by 2.9% since March 2020, led by full time employment (4.1%) with part time employment modestly higher (0.4%).
Hours worked rebounded by 8.9% in February from a disrupted opening month to 2022 (-8.6%m/m) when many people were away from work due to Omicron isolation or were taking annual leave. February's rebound lifted hours worked to 2.7% above their pre-Covid level, broadly in line with the rise in employment over the period. The full review of February's report is available here.
Market expectations | Labour Force Survey
Employment is expected to ease back to a 30k rise in March around a range of estimates from -25k to 60k. The ABS's high frequency payrolls series reported a softening over the month to the reference period for the March survey (-0.6%), which was partly attributed to the effects of the flood diasters in New South Wales and Queensland.
The national unemployment rate is expected to print with a 3 handle in March, with a decline from 4% to 3.9% anticipated. If achieved, this would be the first time since 1974 that the unemployment rate has fallen below 4%, taking out its pre-financial crisis low in the process. Given its recent momentum, the participation rate may rise further from February's record high of 66.4%.
What to watch | Labour Force Survey
Rising inflation pressures and a tightening labour market led to a hawkish pivot from the RBA at last week's meeting that indicated the Board was close to raising its cash rate target from its pandemic low of 0.1%. A strong report today would be further vindication for markets and would likely be seen as a green light to move to price in a larger 40bps hike to 0.5% in June. The broader context is that the nation is on the verge of a historic moment with the unemployment rate set to fall to be pressing 50-year lows not even 2 years on from the depths of the pandemic recession that sent the unemployment rate soaring to its highest since the late 1990s at 7.4%.
