Australia's labour force survey for the final month of 2024 is due from the ABS this morning (11:30 AEDT). Employment growth remained resilient throughout 2024 and labour market conditions were retightening as year-end approached - highlighted by the unemployment rate returning to a 3 handle in November. However, with inflation cooling, the RBA at its December opened the door to easing monetary policy in 2025. Accordingly, market pricing for a February rate cut has built up to around a 75% chance. A very strong report today is likely needed to drive a hawkish repricing of those expectations.
December preview: Markets calling a subdued finish to 2024
Markets go into today's report holding modest expectations. Employment is anticipated to slow to 15k in December from a 35.6k rise last time out, with the unemployment rate ticking back up to 4.0% from 3.9% in November. As the chart below shows, employment (green line) throughout 2024 has consistently defied expectations (yellow line) to cool amid slowing economic growth. The growing consensus is that the resilience in employment has been driven by the non-market (or government) sectors of the labour market.
In light of the momentum in employment, the 15k forecast for December is a pessimistic call - particularly so given that in the 3 months to November employment gains averaged almost 36k per month. Although markets are clearly not anticipating a repeat of the declines in employment seen in the Decembers of 2022 (-11k) and 2023 (-59.4k), the outlook is for a subdued finish to 2024. I see the risks as skewed to the upside of the 15k consensus.
On the back of expectations for a softer employment outcome, the unemployment rate is forecast to tick back up from 3.9% to 4.0%, partly reversing the decline seen in November. For context, the unemployment rate has averaged 4.0% over the past 3 months, in line with its average across 2024. Current RBA forecasts have unemployment lifting to 4.5% by the end of 2025.
November recap: Unemployment rate falls back below 4%
The national unemployment rate fell to an 8-month low of 3.9% in November from 4.1% in October, defying an expected rise to 4.2% as employment reaccelerated. Coming off a modest rise in the prior month (12.1k), employment lifted by 35.6k (full time +52.6k/part time -17.0k) in November to outperform the 25k consensus figure.
Alongside the lower unemployment rate, the broader underemployment rate declined from 6.2% to 6.1% - its lowest level in 2 years. Factoring in the declines in both measures, total labour force underutilisation tightened from 10.3% to 10.0% in November to stand at a 14-month low. Labour force participation eased slightly in the month from 67.1% to 67.0% but remained near cycle highs.
Hours worked came in flat in November (0%m/m) as a 0.2% increase in hours worked in the full time segment was offset by a 1.1% fall in part time hours. Annual growth in total hours eased from 2.2% to 2.1%. Since the back end of 2023, employment growth has been outpacing growth in hours worked, resulting in average hours worked per month slowing from around 137 hours to 135 hours.
