Australia's Labour Force Survey for February is due at 1130 (AEDT) today. Labour market conditions have remained robust amid a slowing economy and did not stand in the way of the RBA's February rate cut. Even with an outlook for labour market conditions to remain solid, two further cuts are priced into the domestic curve by year-end on the expectation of continued progress on inflation.
February preview: Seasonality likely to boost employment
Solid outcomes across the key metrics for the labour market are anticipated today. Employment is forecast to increase by 30k (range: 15-60k) after rising by 44k last time out in January. This is the highest expected figure since February last year, as markets look for employment to receive a seasonal boost from workers moving into new roles that they were waiting to commence in January. Those dynamics saw employment surge by 118.7k in February 2024. While a repeat of that magnitude is unlikely, the risks are skewed to the upside of the 30k forecast; employment gains averaged 44.4k over the past 3 months - before allowing for any seasonal boost. My estimate is for a 55k rise.
The national unemployment rate is expected to remain at 4.1% after rising from 4% in January. However, with upside risk to February's employment outcome, the unemployment rate could well fall back to 4% - potentially even 3.9% if the participation rate were to ease from its current record high level of 67.3%.
January recap: Strong start to 2025
Strong momentum in employment continued into 2025 increasing by a further 44k in January, coming in above consensus (20k) for the 7th time in the past 8 months. This came on the back of the strongest rise in full time employment (54.1k) in 6 months; part time employment declined modestly (-10.1k) - a reversal of the outcome in December where employment rose by 60k on strength in the part-time segment (83.7k; full time -23.7k). January's outcome lifted the 3-month average for employment gains from 34k to 44.4k, the fastest pace in 4 months.
Despite January's rise in employment, the national unemployment rate lifted from 4% to 4.1%. This was partly due to seasonality: the number of people with a job but waiting to start work - thus not counted as employed in the survey - spiked to 250.1k in January, a similar level to 2023 and 2024. The higher unemployment rate also came as the participation rate reset to a new record high of 67.3%, up from 67.2% in December. With the broader underemployment rate holding at 6%, total labour force underutilisation increased from 10% to 10.1%; however, this is well below its recent highs through the middle of 2024, reflecting the tightening that occurred in the labour market over the back half of the year.
Seasonal effects were also evident in hours worked, declining by 0.4% in January following a rise in the number of people working reduced hours during the peak holiday period. However, this effect was less pronounced in 2025 than in the years throughout and just after the Covid period, a base effect that resulted in annual growth rising from 3.2% to 5.9%.
