Activity in the Australian labour market has regained momentum after slowing around the turn of the year. Employment rebounded by almost 65k in February to post its strongest rise in 8 months. The unemployment rate fell back to 3.5% to be close to its cycle low and broader measures of spare capacity reversed recent increases.
Labour Force Survey — February | By the numbers
- Employment increased on net by 64.6k in February, rising more than the 50k expected and rebounding from consecutive falls in January (-10.9k) and December (-16.6k).
- National unemployment rate fell back to 3.5% from 3.7% to sit just above the cycle low of 3.4% from October-22. The underemployment rate fell from 6.1% to 5.8% and the underutilisation rate declined 0.4ppt to 9.4%, a near 41-year low.
- The participation rate lifted 0.1ppt to 66.6%, while the employment to population ratio rebounded from 64.1% to 64.3% to be close to record highs.
- Hours worked surged by 3.9% in the month after the peak summer holiday season drew to a close.
Labour Force Survey — February | The details
Australia's labour market moved back into gear in February as activity rebounded from a seasonal-related slowdown over December and January. Around 4.9 million Australians returned from summer holidays in February, with many of the almost 277k people who were waiting to start new jobs in January commencing work.
The return to or start of work in 2023 for many saw hours worked surging by 3.9% in February, rebounding from three consecutive declines. Many fewer Covid-related absences were also a factor that supported rising hours compared to when the virus hampered activity in November (-0.4%) and December (-0.9%).
Employment exceeded expectations lifting by 64.6k, led by full time employment (74.9k) as part time employment declined (-10.3k). This more than reversed a combined fall in employment of 27.5k over December and January.
Over the past 3 months, employment lifted by 37.1k (3-month average of 12.4k), with full time rising by 50.6k and part time falling by 13.6k. That leaves the 3-month annualised pace of employment running just above 1%; the pace was averaging around 2.7% in the 3 months to November-22, so further solid gains in employment may be expected if conditions in the labour market are returning to that sort of momentum post its seasonal slowdown.
After falling over December and January, an uptick in the participation rate to 66.6% added 48k people to the labour force. As that was exceeded by the rebound in employment, this saw the unemployment rate falling back from 3.7% to 3.5%, close to its half-century low of 3.4% in October-22.
Furthermore, the rebound in hours worked helped reverse recent rises in measures of spare capacity; the underemployment rate declined to 5.8% to match its level in November-22 and the total underutilisation rate retraced to its Octener-22 level at 9.4%, the latter sitting close to a 41-year low.
Labour Force Survey — February | Insights
A strong report today that effectively confirms the weakness in conditions in December and January was driven by seasonal factors. Forward-looking indicators of labour demand have come off their highs but remain elevated and point to a resumption of the momentum in hiring prior to the recent slowdown. This is important given the strong inflow of overseas arrivals, but that should also boost participation and keep the rise in wages growth to a gradual pace, consistent with the RBA's recent downgrading of the risk of a wage-price spiral.