Australia's labour force survey for October is due for release this morning (1130 AEDT). Slowing employment growth over recent months culminated in the national unemployment rate rising to 4.5% in September, its highest level in nearly 4 years. This initially elevated expectations for an RBA rate cut at the November meeting, only to be derailed by a stronger-than-expected rise in inflation in the September quarter. With the RBA subsequently reaffirming that policy is being driven by the inflation side of its dual mandate, markets have provisionally called time on the easing cycle; however, continued softening in the labour market would likely prompt a reappraisal of that view.
October preview: Conditions expected to stabilise
Markets are largely sitting on the fence going into today's report. Employment is expected to rise by 20k (range: 10-40k), broadly in line with the average expectation (24k) since the March report, following a 14.9k rise in September. After lifting from 4.3% to 4.5% last time out, some retracement is anticipated in the unemployment rate, expected to ease back to 4.4% (range: 4.3-4.5%). Going on recent form, risks appear tilted to the upside for the unemployment rate, due to subdued momentum in employment and near record high labour force participation.
September recap: Unemployment rises to 4-year highs
Headline unemployment rose unexpectedly to 4.5% in September from an upwardly revised 4.3% in August. This was the highest single reading since November 2021, lifting the quarterly average to 4.3% - also a high back to late 2021. In addition, increases in the underemployment rate from 5.7% to 5.9% and in labour force underutilisation from 10% to 10.4% were indicative of a broader softening in labour market conditions.
Factors on both the demand and supply side played a role in the rise in unemployment. For the 4th time in the past 5 months, employment disappointed expectations lifting by 14.9k (vs 20k) in September - though it more than recouped the decline seen in August (-11.9k). Full time (8.7k) and part time (6.3k) contributed modest gains to employment.
On the supply side, the participation rate picked up from 66.9% to 67%, adding almost 50k people to the labour force. Because this far exceeded the gain in employment, the unemployment rate moved upwards. Nonetheless, the employment to population ratio - the share of people in work - remained steady at its elevated level (64%).
Hours worked for September were up 0.5% and rose by 1.4% over the year. In recent times, hours have been volatile from month to month, but over the September quarter total hours were flat compared to the June quarter.
