Conditions in the Australian labour market remain largely unchanged with the key indicators steady in September. Employment and hours worked consolidated over Q3, partly impacted by Covid-related and seasonal factors. The labour market looks to be settling following the pandemic, though labour demand is still robust and should support employment growth. Given its focus on the labour market data, today's report looks broadly consistent with the RBA's decision to downshift the pace of its rate hiking cycle.
Labour Force Survey — September | By the numbers
- Employment posted a minor increase of 0.9k in September, well below the consensus forecast (25k). Upward revisions lifted employment in August to 36.3k from 33.5k.
- The unemployment rate remained unchanged at 3.5%, in line with expectations. Underemployment was steady at 6%, though total underutilisation increased to 9.6%.
- The participation rate held at 66.6%, remaining around record highs.
- Hours worked were flat in September and only 0.2% higher over Q3. Covid-related absences and seasonal volatility have disrupted activity in the labour market in recent months.
Labour Force Survey — September | The details
There was little change to the labour market in September as many of the headline indicators were unchanged from August. Employment increased by only a net 0.9k, with a 13.3k gain in full-time employment largely offset by a 12.4k fall in part-time employment.
Hours worked were unchanged over the month as Covid-related absences fell from their highs but annual leave saw an increase. For Q3 overall, hours worked lifted only by 0.2% to be 4.5% higher than their pre-pandemic level from March 2020.
After causing significant disruption through autumn and winter, the effect of Covid-related absences eased in September. Around 570k Australians reported working fewer hours than usual in the month due to illness, still an elevated number but well down from an average of around 760k over the previous 5 months. This supported a decline in absences for caregiving reasons, to 316k from more than 350k in August. Although Covid-related disruptions eased, there was a noticeable rise in annual leave of nearly 320k people compared to August. This was a return to more normal levels of annual leave in September compared to 2020 and 2021 which were impacted by lockdowns.
The size of the labour force increased by a modest 9.8k in September, leaving the participation rate steady around record highs (66.6%). With employment rising by only 0.9k that meant unemployment rose by 8.8k. When rounded to one decimal place, the unemployment rate held at 3.5%, in line with the lows last seen in 1974. Given hours worked were flat, there was no change in the broader underemployment rate (6%). Underutilsiation was a touch higher in the month at 9.6% but remains at 40-year lows.
Labour Force Survey — September | Insights
The labour market looks to be moving toward a phase of consolidation following the recovery from the pandemic and as its associated disruptions dissipate. Employment on a 3-month rolling average in Q3 was just 0.2k, down from 39.3k in Q2; however, my interpretation is that the extent of the slowdown has been accentuated by seasonal and Covid-related volatility. The elevated stock of vacancies indicates labour demand remains strong, though the pace of hiring has clearly slowed as the labour market has tightened. Those vacancies will help keep a hold on the unemployment rate as growth in the working-age population (currently 1.2%Y/Y) returns to a more normal pre-pandemic pace in response to the reopening of the borders. Given wage pressures in Australia have remained relatively contained compared to many other advanced economies, today's report on the labour market supports the downshift made by the RBA to a 25bps rate hike earlier in the month after four consecutive 50bps increases to the cash rate.
