Australia's labour force survey seemingly went rogue in February as a highly volatile set of numbers were posted. The seasonal boost to employment expected from the 250k people who were waiting to start work in January failed to show up; instead, the ABS reported that the labour market was hit by a wave of retirements after the summer holidays. This was apparently behind employment falling by nearly 53k in the month and the participation rate (66.8%) declining from record highs. A low and steady unemployment rate of 4.1% likely keeps the RBA on hold at its April meeting, with a rate cut in May hinging on more inflation progress.
By the numbers | February
- Employment declined by a net 52.8k in February (full time -35.7k/part time -17k), wiping out all estimates; the median looked for a 30k rise from a range between 15-60k. January's increase was revised down from 44k to 30.5k.
- The unemployment rate remained at 4.1%, as expected, but only rounding held it there; at two decimal places it fell from 4.11% to 4.05%. Both underemployment and underutilisation did fall moving down from 6.0% to 5.9% and from 10.1% to 9.9% respectively.
- Labour force participation fell abruptly from record highs in January (67.2%) to 66.8% in February, an 8-month low.
- Hours worked reportedly fell by 0.4% in February following a surprise revision to the January series to 0.2% from -0.4%.
The details | February
Employment was down by 52.8k in February, its worst result in 11 months and its largest decline since December 2023. Both major segments contributed to the fall: full time -35.7k and part time -17.0k. This result was completely against the run of play. Strong momentum in employment delivered consistent upside surprises relative to expectations across the back half of 2024, which then continued into 2025 with the January's result - even allowing for its downward revision from 44k to 30.5k.
The expectation was that employment would see a seasonal boost from workers moving into new roles that they were waiting to commence at the time of the January survey, as has been seen in recent years. Last month, the ABS reported that around 250k workers were attached to new roles but yet to start. If the rise in retirements that the ABS has picked up was occurring at the same time as this influx of workers moving into employment, then that could well explain the volatility seen in today's report.
Hours worked can be a go-to when the labour force series delivers a volatile report - but not on this occasion. In January - the peak of the summer holidays - hours worked were initially reported to have fallen by 0.4%, with 22.3% of employed people working reduced hours. That outcome was inexplicably revised to a 0.2% increase for hours worked in January in today's report; only to then have fallen by 0.4% in February - presumably linked to the increase in retirements.
The sudden decline from record highs in labour force participation (67.2% to 66.8%) and in the employment to population ratio (64.4% to 64.1%) in February looks also to be driven by retirements.
Overall, the best summary statistic of the labour market in February was the unemployment rate, which remains low and steady at 4.1%. The broader measures of underemployment (unemployed and those wanting more hours) and total underutilisation (unemployed and underemployed) tightened in the latest month to 5.9% and 9.9% respectively, levels well down on their recent highs from the middle of last year.
In summary | February
Underlying conditions in the labour market look to remain solid amid a highly volatile report. The next RBA meeting falls at the turn of the month where a pause following the cut in February looks likely. Sufficient progress in the quarterly inflation data (due April 30) likely paves the way for a cut at the May meeting (19-20).
