Australia's unemployment rate fell to a new half-century low of 3.4% in October as employment rebounded from a recent slowdown. Hours worked saw their sharpest rise since early in the year with Covid-related disruptions continuing to dissipate. The further tightening in the labour market comes with participation remaining around record highs, helping to keep wages growth in check. Another 25bps rate hike from the RBA in December looks all but certain.
Labour Force Survey — October | By the numbers
- Employment advanced by 32.2k in October - stronger than the 15k rise expected and rebounding from a 3.8k fall in September (revised down from +0.9k).
- The unemployment rate fell to 3.4% from 3.5% (markets expected no change), establishing a new low going back to 1974. Underemployment fell to 5.9% from 6.0%, lowering total underutilisation from 9.6% to 9.3%, a 41-year low.
- The participation rate was little changed, reported at 66.6% and close to record highs.
- Hours worked saw their sharpest rise in 8 months accelerating by 2.3% in October with Covid-related disruptions showing further indications of waning.
Labour Force Survey — October | The details
The national unemployment rate has fallen to a new-post pandemic low of 3.4% in October, its lowest level since late 1974, and spare capacity in the labour market declined further. Combined with a fall in the underemployment rate to 5.9%, total underutilisation (share of the labour force either unemployed or underemployed) was driven down to a 41-year low of 9.3%.
Employment posted a 32.2k net increase in October - more than double the expected rise and the largest upside surprise relative to market expectations since June. Full time employment lifted by 47.1k while part time employment fell by 14.9k. The composition likely reflects many part-time workers working additional hours and crossing the threshold for being employed full-time (35 hours in the survey week) rather than losing employment.
This was a solid start to Q4 for employment after a slight weakening in Q3 (-4k). The slowing in the pace of hiring reflected the tightening in the labour market and was also hampered by Covid-related and seasonal disruptions.
Hours worked accelerated by 2.3% in October, its strongest rise since February, surging to 7.4% above pre-Covid levels. In October, full-time hours lifted by 2.9% while part-time hours fell by 0.6%.
The very strong rise in hours worked came despite 4.2 million Australians working fewer hours than usual in the survey period, up from 3.3 million in the previous month. The bulk of that increase was due to annual leave, as this morning's preview suggested was likely. However, hours worked were still able to rise due to part-time workers working additional hours, and as the disruptions caused by Covid continued to wane. The number of Australians working fewer hours than usual due to illness fell markedly in October, to be at its lowest level since December last year - prior to the Omicron wave.
Unlike other comparable countries - the US and UK of note - the supply side of the Australian labour market has not been damaged by the pandemic. In October, the participation rate (66.6%) and the share of Australians in work (64.3%) were broadly unchanged, both around record highs and materially above where they were prior to the pandemic. This has been a key factor that has contributed to the fairly measured rise in wages growth as the labour market has tightened.
Labour Force Survey — October | Insights
Employment lifted more strongly than expected in the month, coming through a Q3 slowdown to confirm the signals from job vacancy data that underlying labour demand remains robust. That demand continues to see the labour market tighten, with the unemployment rate falling to a new low since 1974 and overall spare capacity at its lowest level since the early 1980s. On the back of this, wages growth has picked up to be running at its fastest since 2013, but at 3.1%Y/Y is hardly cause for alarm. All in all, this week's data points on the labour market will keep the RBA on its current course, with the cash rate to rise by another 25bps in December.