Australia's Labour Force Survey is due to be released by the ABS at 11:30am (AEDT) this morning. The past couple of reports have come in weak relative to expectations, leading RBA Governor Lowe to recently observe that labour market conditions had "eased a little" and open the door to pausing the tightening cycle. Markets are currently priced for that pause to come at the April meeting.
As it stands | Labour Force Survey
Employment is coming off consecutive declines in December (-20k) and January (-11.5k) as labour market conditions appeared to soften around the turn of the year. Over the past two months, both full time (-28.9k) and part time employment (-2.5k) have declined. However, seasonal factors likely overstate this recent weakness.
The unemployment rate is now at 3.7%, up slightly from the cycle low of 3.4% in October. This has also come alongside rises in underemployment (6.1%) and the total underutilisation rate (9.8%). Despite the rising inflow of overseas arrivals, the participation rate moved lower over December-January — something not uncommon over the peak holiday period — printing at 66.5% in January.
A resurgence in Covid-related absences weighed on hours worked in November (-0.4%) and December (-1.1%). Then in January, hours worked fell sharply (-2.1%) due to a larger-than-usual rise in the number of workers taking annual leave.
Market expectations | Labour Force Survey
Employment is expected to rebound in February, with the consensus forecast for today's report at 50k. On that basis, the market anticipates the unemployment rate to fall back to 3.6%. The ranges of estimates for employment (4k to 100k) and the unemployment rate (3.5% to 3.8%) are wider than usual, indicating a low level of conviction on where these outturns may print.
What to watch | Labour Force Survey
The key question for today's report to answer is whether seasonal factors overstate the weakness in labour market conditions recently. Changing seasonal patterns in hiring suggest this could be the case. Since the onset of the pandemic, many more people have moved into employment in February than has historically occured, after reporting they were waiting to start a new job in January.
This effect boosted employment in the Februarys of 2021 (75k) and 2022 (93.1k) and looks likely to repeat in 2023. In January 2023, there were 276.9k people who were waiting to commence a new job, similar numbers to in 2021 (249.4k) and 2022 (287.7k), indicating a rebound in employment is likely to be reported today.
That assessment is further backed up by the ABS's high frequency payrolls data. After declining into year-end, payrolls rebounded over the month to mid-February in 2021 (2.8%) and 2022 (3.3%). The rebound in 2023 was of a similar magnitude at 2.6%, consistent with the pattern of more people moving into employment in February.
