Australia's monthly labour force survey for September is due for release this morning (11:30am AEDT). Resilient labour market conditions to the economic slowdown of the past year or so and elevated inflation continue to underpin the RBA's hawkish narrative as central banks offshore have moved into easing cycles. Although tightness in the labour market has eased, employment has continued to rise solidly and the unemployment rate remains at low levels. Today's report is expected to broadly reaffirm those dynamics.
August recap: Employment continued to defy expectations
Employment continued to increase with a 47.5k gain coming through in August, the 5th consecutive upside surprise on expectations. These gains in employment have been driven predominantly by the full time segment; however, in August part time employment (50.6k) accounted for all of the headline increase as full time employment eased (-3.1k).
With the participation rate holding at a record high (67.1%), the increase in employment in August broadly absorbed the number of workers either entering or returning to the labour force. As a result, the unemployment rate printed at an unchanged 4.2%. Despite the broader underemployment rate lifting from 6.3% to 6.5%, the ABS reported total underutilisation in the labour force remained at 10.6%.
Hours worked expanded by 0.4% in the month, matching the increase seen in July. Annual growth in hours worked lifted to 1.7%, well down from a 3.2% pace a year earlier. This has been the most responsive part of the labour market to the slowdown in economic growth.
September preview: Employment expected to moderate; upside risk to unemployment
The main risk going into today's report looks to be an uptick in the unemployment rate should the strong run of employment gains falter. In September, a relatively modest increase in employment of around 23k is expected, with estimates ranging from a low of 10k to 45k on the high side. The expected figure is around where consensus has landed over recent months, which as noted above employment has outperformed in each of the past 5 reports.
Despite that trend, there may be more confidence from the market in seeing a moderation in employment this time given the relatively modest rises in September in 2022 (19.7k) and 2023 (11.9k). If employment were to moderate as markets anticipate there is upside risk to the consensus forecast for the unemployment rate to hold steady at 4.2% (range: 4.1% to 4.3%) due to record high participation delivering large inflows of workers into the labour force.
