Australia's Labour Force Survey for December is due at 11:30am (AEDT) today. Labour market tightness eased through 2023, though employment growth has remained strong and has accelerated into year-end. A modest expectation for employment (15k) could be exceeded while the unemployment rate is forecast to remain at 3.9%.
A recap: Employment growth accelerates, but the unemployment rate rises
Employment increased at its fastest pace in several months rising by 61.5k in November, well above the expected outcome of 11.5k. This came on the back of a resurgence in full time employment (57k), with part time employment lifting modestly (4.5k). Despite a downward revision in October from 55k to 42.7k, employment is still up by a little more than 100k over the past couple of months, an acceleration from an increase of 76.1k in Q3.
Australia's strong pace of population growth has been a factor supporting employment through additional demand. It has also boosted the supply side of the labour market, reflected in the participation rate reaching a new record high in November at 67.2%. But the balance between labour demand and supply has recently put upward pressure on the unemployment rate, which lifted from 3.8% to 3.9% in November, its highest since May 2022 and up from cycle lows of 3.4%. The underemployment rate (6.5%) and the labour force underutilisation rate (10.4%) have also eased after reaching their lows in late 2022 to early 2023.
After posting a solid 0.4% rise in the prior month, hours worked were unable to advance further coming in flat in November. Growth in hours worked has slowed over the past year (1.6%) and is well below the pace of employment growth (3.2%). This likely reflects firms adjusting to slower economic growth by reducing hours rather than employment.
Employment is expected to moderate in December...
In today's report, the consensus forecast is for employment to slow to a 15k rise in December, though the range of estimates is very wide (35k to -10k). Unemployment is anticipated to hold at 3.9%, based on an unchanged participation rate into year-end.
... though markets have underestimated its resilience
In 3 of the past 4 months, employment has outperformed expectations, and by a material margin on most of those occasions. The interest in today's report is if there is another upside surprise; the recent trend suggests this is likely, while the ABS's payrolls series supports this view after the index was reported in yesterday's release to have risen by 0.5% for the month to mid-December. My interpretation has been that employment is being bolstered by population growth, remaining resilient to the backdrop of a slowing economy.
