Australian employment increased by a little over 30k in March, not quite matching the 40k rebound expected after February's shock 53k decline. This saw the national unemployment rate creeping up to 4.1%, leaving pricing for an RBA rate cut in May fully intact. Attention on the data front now turns to the Q1 CPI report at the end of the month for the final green light.
By the numbers | March
- Employment increased by 32.2k in March (full time 15k/part time 17.2k), falling short of the 40k rebound expected following February's surprise fall (-57.5k).
- Rounding saw the headline unemployment rate reported at 4.1% in March (4.05%), up from 4.0% in February (4.04%). The broader underemployment (5.9%) and underutilisation rates (9.9%) were unchanged from February's levels.
- Labour force participation failed to rebound from the sharp decline in February, remaining at 66.8%.
- Hours worked were down by 0.3% nationally in March (0.7%yr), driven by the disruptions from ex-Tropical Cyclone Alfred in Queensland (-3.8%) and New South Wales (-1.3%). This followed February's -0.4% fall.
The details | March
The expected rebound in employment in March fell short of expectations rising by 32.2k as February's decline was revised to -57.5k from -52.8k. Employment gains were spread evenly across the full time (15k) and part time segments (17.2k), the latter more than reversing its fall last month (-13.6k) while the former disappointed in light of its February decline (-43.8k).
Across the quarter, employment rose by just 6.5k - its weakest outcome outside the covid period since Q3 2016. Given that employment came into the year with strong momentum, this was a surprisingly weak result; the 3-month average slowed from a solid 30.1k at the end of 2024 to just 2.2k by March. But given the elevated volatility in the series in Q1 - with monthly outcomes of 31.7k (January), -57.5k (February), and 32.2k (March) - it may be more noise than signal.
The headline unemployment rate crept up from 4.0% to 4.1% in the month, although that was due to rounding with the level of unemployment (613k) near unchanged on the prior month. Meanwhile, underemployment (5.9%) and total underutilisation (9.9%) held unchanged rates from February. Across Q1, unemployment averaged 4.1% - a slight uptick from 4.0% in the prior quarter - but the average levels declined for underemployment (6.1% to 5.9%) and underutilisation (10.1% to 10%) over the period.
The main surprise in my reading of today's report was that the participation failed to rebound, holding at 66.8% after falling sharply from record highs in January (67.2%). Meanwhile, the employment to population ratio - the share of Australians of working age in employment - was steady at 64.1%, the lower end of its range of the past couple of years.
Nationally, hours worked declined for the second month running - a 0.3% fall for March following the 0.4% slide in February - with base effects reducing annual growth from 2.4% to 0.7%. In the latest month, the fall was attributable to the disruptions caused by ex-Tropical Cyclone Alfred that saw hours worked falling sharply in Queensland (-3.8%) and to a lesser extent in New South Wales (-1.3%).
In summary | March
Employment made a soft start to 2025, slowing notably from the momentum it had into the end of last year. But there are reasons to be cautious in rushing to assessments after one volatile quarter, and employment could quite conceivably bounce back in Q2. Overall, conditions in the labour market still appear fairly robust, with the unemployment rate remaining at a low level alongside elevated participation; however, there are now those lingering questions over employment growth going forward into the headwinds of the US's tariff war.
