Australian employment surged to a 61.5k rise in November, coming in well above expectations for the second month in succession. Rapid post-pandemic population growth is supporting employment and has seen labour force participation reach a new record high (62.7%). However, the unemployment rate has lifted to 3.9%, its highest since May 2022, while hours worked were flat in the month. The labour market is rebalancing from peak tightness and validates the RBA's decision to hold rates unchanged over its summer break.
November by the numbers...
- Employment increased by a net 61.5k in November, sharply above the expected 11.5k rise. A downward revision lowered October's increase to 42.7k from 55k reported initially.
- Headline unemployment shifted from 3.8% (revised up from 3.7%) to 3.9% in November, a high since May last year. With the underemployment rate rising from 6.3% to 6.5%, total underutilisation moved from 10.1% to 10.4%, softening to a 21-month high.
- Labour force participation reset to a new record high at 67.2% from 67%, while the employment to population ratio also stands at a record level after rising to 64.6% from 64.5%.
- Hours worked stalled in November coming off a 0.4%m/m lift in October, up 1.6% over the year.
The details...
After coming through a patchy Q3, employment is accelerating into the back end of 2023. In November, employment increased (on net) by 61.5k, its strongest outcome since August that came as markets were expecting a post-referendum moderation in hiring (11.5k). This was driven by a resurgence in the full time segment (57k) over part time (4.5k), counter to the recent trend. Even allowing for the downward revision to employment in October to 42.7k (from 55k), employment is up by a net 104.2k over the past two months, already well above the increase seen in Q3 (76.1k).
The main takeaway is that momentum in employment growth remains solid. The 3-month average increase to November was 37k, broadly in line with its average through the first half of the year (38.5k). On a 3-month annualised basis, employment growth is tracking at a 3.2% pace.
Regular readers of these reports would be aware that I have been of the view that strong population growth would keep employment supported even as momentum in the economy slows. This looks to be what is playing out currently. Simply put, the working-age population is surging (3%yr) on the back of net overseas migration (MYEFO yesterday put the rise at 510k in 2022/23).
This has delivered additional workers into the country, reflected in record-high labour force participation (67.2%). The participation rate is up 1.4ppts on its pre-Covid level, with 0.4ppt of this rise coming through over the past year. Meanwhile, the share of working-age Australians employed has never been higher (64.4%).
However, as this additional labour supply has arrived, the labour market has loosened. The unemployment rate lifted from 3.8% to 3.9% in November, up from the cycle lows of 3.4% seen a year earlier. Underemployment stands at 6.5% compared to its post-Covid low of 5.8%. Overall, underutilisation - the combination of the two - is now 10.4%, its highest since February 2022. But while the labour market has clearly receded from peak levels of tightness, it still remains robust.
A broad range of indicators - including last week's Q3 National Accounts - are aligning to convey that the economic slowdown in Australia is currently playing out through a reduction in hours worked rather than employment. The various ABS measures report hours worked declined between 0.6-0.8% in Q3. The Labour Force Survey reported an encouraging 0.4% rebound in hours worked in October. I was hopeful this could extend; however, today's report showed hours worked came in flat month-on-month in November.
In summary...
A solid report today that was headlined by an acceleration in employment into year-end. Employment increasingly looks to be supported by strong population growth, and I remain upbeat that this can continue. But there is a rebalancing occurring in the labour market, reflected in the easing in conditions from peak levels of tightness and weakness in hours worked. Together with the slowdown in Q3 GDP growth, I think today's report will be read by the RBA as validating the decision last week to leave rates unchanged.
