Activity in the Australian labour market rebounded from a temporary slowing in July with employment, participation and hours worked rising in August. Although the unemployment rate ticked up slightly to 3.5% it remains at half-century lows, indicative of the robust demand for labour that shows little sign of easing.
Labour Force Survey — August | By the numbers
- Employment increased by a net 33.5k in August, broadly in line with consensus (35k) and mostly reversing July's 40.9k fall.
- The unemployment rate came in a touch higher at 3.5% from 3.4% in July (3.4% expected), but remains at lows dating back to 1974. Underemployment eased to 5.9% from 6%, leaving total underutilisation steady (9.4%).
- The participation rate rebounded to 66.6%, after falling to 66.4% in July.
- Hours worked lifted by 0.8%m/m, overturning the 0.8% fall in July associated with seasonal factors and Covid and weather-related disruptions.
Labour Force Survey — August | The details
August's Labour Force Survey broadly reversed the weakness that was reported in July when activity was hampered by disruptions from Covid-related absences, La Nina and winter school holidays. Total hours worked lifted by 0.8% month-over-month in August, rebounding from a 0.8% fall in July. This saw hours worked rising to 4.5% above their pre-Covid level.
Driving the rise in hours worked was the return of workers from annual leave; the number of Australians working fewer hours than usual due to annual leave fell by 731k in the month (to 839k), a large fall that lines up with the return of schools from winter holidays. This was reflected in the rebound in full time hours worked, up 1.4%m/m from -1.2% in July.
Covid-related absences lifted slightly over the month, causing 761k Australians to work reduced hours in August. Due to the winter spike in Covid cases and the return of schools, there was a 60k rise in the number working fewer hours than usual in August due to caregiving reasons (352k).
Employment increased by 33.5k (on net) in August, mostly rebounding from the 40.9k decline in July. Full time employment posted a 58.8k rise (-86.9k in July) while part time employment fell by 25.3k (from +46.0k). Australian employment now stands at 13.592m, 4.5% higher than pre-Covid levels.
As labour market activity picked up again from the July slowdown, participation in the labour force lifted. After falling from record highs (66.8%) to 66.4% in July, the participation rate lifted back to 66.6% in August. The share of Australians in work firmed to 64.3% after a small decline in July.
The rise in participation equated to a 47.5k increase in the size of the labour force. As this larger than the lift in employment (33.5k), the unemployment rate came in a touch higher at 3.5% from 3.4% in July but remains at half-century lows. Underemployment was pushed lower to 5.9% (from 6%) due to the rise in hours worked. Overall, this left the rate of labour force underutilisation unchanged at 9.4%, its lowest since the early 1980s.
Labour Force Survey — August | Insights
The August report confirmed the slowdown in hiring and overall activity in the labour market in July was caused by temporary seasonal factors and disruptions. Forward-looking indicators from job vacancies and this week's NAB Business Survey point to employment rising through the back half of the year. That supports the outlook for the unemployment rate to continue falling and for the labour market to keep tightening. That is the scenario expected by the RBA and so today's report should have few implications for the October meeting. With the report mostly printing in line with their expectations, it will also do little to dissuade markets from pricing in a reduction in the pace of the next hike to a 25bps increase from the 50bps hikes seen at the previous 4 meetings.
