Australian employment increased by 64k in November coming in strongly to the upside of expectations for the second month running. A reacceleration in employment from a slowdown in Q3 has drawn a supply response, with the participation rate back at record highs. The national unemployment rate remained at its half-century low of 3.4% and broader measures of spare capacity were reduced further. The report is consistent with the RBA raising rates in 2023.
Labour Force Survey — November | By the numbers
- Employment increased by 64k in November, well above the consensus estimate (19k). Upward revisions were made to prior months, including an elevation in October's outcome to 43.1k from 32.2k initially reported.
- The unemployment rate was unchanged at 3.4%, remaining at its lowest level since 1974. The underemployment rate fell from 5.9% to 5.8%, driving the broader underutilisation rate down from 9.4% to 9.3%, its lowest since 1982.
- The participation rate returned to record highs lifting from 66.6% to 66.8%.
- Hours worked were a touch softer in November (-0.4%) coming off a 2.4% surge in October that reflected a significant easing in Covid-related absences.
Labour Force Survey — November | The details
Employment posted its strongest increase in 5 months rising by 64k in November, with gains coming through in both the full-time (34.2k) and part-time segments (29.8k). This morning's preview provided the correct steer for Macro View readers identifying that the reacceleration in employment in October was likely to carry on into November. Hiring temporarily slowed over Q3 but has reaccelerated sharply to rise by 107.1k over October-November.
The labour market remains dynamic, with the reacceleration in employment being met with a supply-side response. The participation rate lifted to 66.8% to be in line with its record high, up 0.6ppt since the start of the year and 1ppt above its pre-pandemic level. Growth in the working-age population has lifted since earlier in the year supported by the full reopening of the international border (chart below). The share of the working-age population in work is also at a record high (64.5%) after rising by 0.2ppt in November.
November's strength in employment was sufficient to maintain the national unemployment rate at 3.4%, equal to its lowest level since September 1974. The underemployment rate came in 0.1ppt to 5.8%, a low to August 2008. The broadest measure of spare capacity in the labour market has come down further, reduced to 9.3% in November to be at its lowest level since March 1982.
The one aspect of today's report that did not improve from October was hours worked (-0.4%m/m). However, that was coming after a very strong rise in October (2.4%), which was driven by a reduction in Covid-related absences to their lowest level of the year.
In November, the number of people working fewer hours due to illness increased again but was still well down from the peak in August. Meanwhile, new lows continue to be seen in the number of Australians on reduced hours due to economic reasons (such as insufficient work or layoffs etc), consistent with the very low level of spare capacity in the labour market.
Labour Force Survey — November | Insights
The Australian labour market remains very robust. Employment has reaccelerated following a slowdown in Q3 and forward-looking indicators remain consistent with this strength continuing well into 2023. Spare capacity is at historical lows and the participation rate is up at record highs. Wages growth in this labour market has picked up but only to a 3.1% pace, far from the levels that would concern the RBA that high inflation is driving up wage settings. But the RBA remains cautious and indicated at last week's meeting that rates are expected to rise again in February. Thereafter, I see the case for the tightening cycle to go on pause will build and be on the table in March.
