Australia's unemployment rate remained at 4.1% in April as employment surged by 89k, a massive upside surprise on the 22.5k rise expected and the largest increase since February last year. An above consensus print on wages growth yesterday (0.9%q/q, 3.4%Y/Y) into today's strong labour market report drove a hawkish reaction in markets that were fully priced for an RBA rate cut next week. Given the February cut was a close call, next week's decision looks like it will also be close. But with core inflation returning to the 2-3% target band for the first time since 2021 and the labour market remaining solid, the case for a further winding back of policy restriction will likely win out.
By the numbers | April
- Employment rocketed up by 89k in April (full time 59.5k/part time 29.5k), an outcome more than double the top side of the forecast range (15-40k) and around 4 times higher than the 22.5k consensus figure. An upward revision lifted the gain in March to 36.4k from 32.2k reported initially.
- The unemployment rate was steady at 4.1%, as expected. But underemployment lifted from 5.9% to 6.0%, pushing up the total underutilisation rate from 9.9% to 10.1%, bringing both measures back to their levels at the start of the year.
- Labour force participation rebounded to near record highs, lifting to 67.1% from 66.8% in the prior two months.
- Hours worked were flat in April (1.1%yr) coming off back-to-back falls in February (-0.4%) and March (-0.3%).
The details | April
The volatility seen in employment outcomes through Q1 has extended into April. After the outcomes in February (-56.3k) and March (36.4k) missed to the downside of consensus, payback came in the form of a huge upside result of 89k in the latest month. Looking through the month-to-month swings - as the RBA will do - the overall picture is still consistent with a robust labour market. Employment has increased by around 104k since the end of last year, with gains averaging out at a decent pace of 26k per month.
Encouragingly, the strength of employment in April held the unemployment rate at 4.1%, even as the participation rate returned to a near record high level of 67.1%. A wave of retirements saw participation fall earlier in the year, raising questions as to whether the peaks had passed. A combination of elevated participation and historically low unemployment remains a constructive one for the nation. Although the broader underemployment rate at 6% and total underutilisation at 10.1% drifted up in April, both remain materially below their respective levels in the soft pre-pandemic labour market.
Monthly hours worked levelled out in April (0%) after falling by 0.7% across February-March - a decline partly driven by the disruptions from ex-tropical cyclone Alfred. In reality, the hours worked outcomes have been just as volatile as the employment ones. A surge in employment in April should logically have seen hours worked rise, but gains may show up in the coming months.
In summary | April
Although the data have been volatile, the key take away is that Australia's labour market remains in robust shape. Peak levels of tightness have eased, and participation is back near record highs - consistent with the overall rebalancing of demand and supply the RBA has been wanting to see to indicate the labour market will not be a source of inflationary pressure. That is backed up by core inflation returning to the 2-3% band in the March quarter. The light remains green for the RBA to cut next week.
