Australian employment increased by 55k in October, well above expectations to headline a more upbeat read on the labour market than in the prior month. Although there was a shift up in the national unemployment rate to 3.7%, this came alongside the labour force participation rate returning to record highs (67%). Hours worked (0.5%) saw their strongest rise in several months.
October by the numbers...
- Employment increased by a net 55k in October (FT +17k/PT +37.9k), well above the expected outcome (+24k) and up sharply on September's modest outturn of +7.8k (revised from +6.7k).
- Headline unemployment shifted from 3.6% to 3.7%, as expected. With the underemployment rate holding at 6.3%, the underutilisation rate ticked up 0.1ppt to 10.0%.
- Labour force participation returned to record highs at 67%, reversing September's fall to 66.8%. The employment to population ratio also rebounded, rising to 64.5% from 64.4%.
- Hours worked advanced 0.5% month-on-month (1.7%yr), its strongest outurn since April.
The details...
Employment increased by 55k in October, sharply above expectations while backward revisions boosted employment by 8.1k over August (70.3k) and September (7.8k). A rotation from full time to part time work was evident during the third quarter - a sign of adjustment in the labour market to slower growth - but both segments increased in October. Full time employment lifted by 17k, its strongest rise since June. Part time employment advanced by 37.9k, likely boosted by temporary hiring associated with the Voice Referendum; however, this was also comfortably below the gains of 59.0k in August and 44.3k in September.
Incorporating October's rise in employment with the upwardly revised outcomes from August and September, the 3-month average change in employment lifted to 44.4k, a high since May. Over the past 3 months, employment growth annualises at around 3.8%, a historically solid pace that indicates labour demand remains resilient.
Backing up the stronger employment outcome, hours worked lifted by 0.5% month-on-month. This was the strongest outcome for monthly hours since April and goes some way to reversing the 0.9% decline in hours during the third quarter. Gains were posted in both full time (0.4%) and part time hours (0.7%) for the first time since April.
Despite the strength in employment and hours worked, the unemployment rate lifted from 3.6% to 3.7%. While the labour market remains strong, conditions have become less tight; the unemployment rate is up from its cycle low of 3.4% from 12 months ago; underemployment is 6.3% compared to its 5.8% low in February, while the total underutisation rate at 10% is 0.7ppt higher than at its trough in October last year.
Contributing to the easing in labour market tighteness has been the substantial addition to the supply side, supported by rapid post-pandemic population growth. The labour force particpation rate reversed a decline in September to return to record highs at 67% in October, the level up from 66.6% a year earlier. Meanwhile, the employment to population ratio (share of working age Australians in work) also stands at a record high (64.5%) and has risen sharply from its level in October 2022 (64.4%).
In summary...
Overall, today's report is consistent with the Australian labour market remaining in robust shape amid the backdrop of slowing economic growth, both domestically and offshore. Conditions have eased from peak levels of tightness, with the surge in population growth coming out of the pandemic a factor. But I remain of the view that the additional boost this has provided to demand can continue to keep employment supported and prevent the labour market from loosening too severely. The RBA appears to have come around to this view, lowering its unemployment rate forecasts in its recent Statement on Monetary Policy.
