Australia's Labour Force Survey for January is due at 11:30am (AEDT) today. Coming off a surprisingly weak end to last year, labour market activity is expected to have rebounded in early 2024. Seasonal volatility likely played a role in December and given January is the peak summer holiday period, this could remain a factor in today's report. Markets forecast employment to partially recover after declining sharply in December, though the unemployment rate may rise to 4% for the first time since early 2022.
A recap: A weak finish to 2023
The December report shocked all comers as employment fell by a net 65.1k (vs +15k expected), its weakest outcome since the Covid lockdowns in 2021. The decline came entirely in the full-time segment (-106.6k), with part-time employment increasing (41.4k). December's outcome was a sharp surprise after strong employment gains were posted in October (44.2k) and November (72.6k). Volatility in the December print and in a range of other data points has raised suggestions that the statistics bureau may be having some difficulties with its seasonal adjustment processes at this time of year in the post-Covid economy.
A large fall in the participation rate to 66.8% from a record-high in November (67.3%) enabled the unemployment rate to remain at 3.9%, despite the sharp employment decline. Outside of the Covid period, a monthly decline of this magnitude has rarely been seen over the history of the series. Alongside a steady unemployment rate, the underemployment rate (6.5%) was also unmoved, leaving total underutilisation unchanged (10.4%).
Rounding out a very weak report, hours worked contracted by 0.5% month-on-month to be down by 0.4% over the final quarter of the year. Coming out of the pandemic, hours worked rebounded strongly, but growth has cooled over the past year (1.2%) as the economy has slowed.
A mixed start to 2024 is expected...
Employment is forecast to rise by 27.5k on the median estimate, partially reversing the December fall. The range of estimates sits between 10k to 55k, reflecting that this could be another volatile outcome. Visibility is limited and the ABS's payrolls series - often a lead indicator for the monthly employment outcome - remains out of publication for the time being. Based on the expectation that the participation rate will rebound, the unemployment rate is forecast to lift from 3.9% to 4% (range: 3.8% to 4.1%). The unemployment rate last printed with a 4 handle in February 2022.
... but there is a lot of uncertainty around today's report
Today's report shapes as a wildcard. The weak detail in the December report could be reversed; however, January is also the peak summer holiday season and this may hold things back. All in all, today's report is unlikely to be a game-changer. Last week, the RBA articulated its assessment of the labour market and updated its economic outlook. The RBA anticipates the unemployment rate to rise to 4.3% by year-end, reflecting cooling employment growth in a slowing economy being unable to match pace with growth in the labour force. This easing of conditions - the RBA believes - is required for inflation to be sustainably held within the 2-3% target band.
