Australia's unemployment rate remained at 4.3% in March, matching market expectations. Employment increased sufficiently (17.9k) to absorb the number of new entrants into the labour market. The RBA has highlighted labour market tightness as a key factor in its current tightening cycle, delivering 25bps hikes in February and March. With today's report reinforcing that narrative, a May hike remains live - though there are clear risks to the labour market amid the conflict and its associated economic impacts.
By the numbers | March
- Employment increased by a net 17.9k, just below expectations for a 20k rise. February's gain was revised up to 49.7k from 48.9k reported initially.
- Unemployment remained at 4.3%, as expected, while underemployment (5.9%) was also unchanged; however, total underutilisation ticked up from 10.1% to 10.2%.
- Labour force participation declined to 66.8% from a 4-month high of 66.9% in February. The employment to population ratio remained at 64%.
- Hours worked rose 0.5% in March, rebounding from a 0.2% fall in February, to be up by 2.5% over the year. In the March quarter, hours worked increased by a solid 0.9%.
The details | March
Employment rose for the 4th month in succession, increasing by a net 17.9k in March. Full time employment (52.5k) drove all of the gain, while part time employment fell (-34.6k) - the inverse February's composition (full time -27.7k/part time 77.3k).
Following gains of 25.6k in January and 49.7k in February, the 17.9k rise in March saw employment increase by 93.1k in the March quarter - the strongest quarterly outcome since Q3 2024. This also put the 3-month average for employment at a respectable 31k. Overall, this indicates momentum in hiring was solid ahead of the headwinds to come from the fuel crisis and the RBA's tightening cycle.
Labour market slack was little changed over the March quarter. The unemployment rate averaged 4.2%, down slightly from the December quarter (4.3%) and below the 4.3% level the RBA forecasts it to reach by mid-year. Both underemployment (5.9%) and underutilisation (10.1%) were in line with their December quarter averages. For a hawkish RBA running a narrative of a tight labour market, there is no reason to think there will be any shift in this regard.
Labour supply is off the levels seen at its highs early last year - though amid renewed cost of living concerns, it could push higher again. The participation rate stood at 66.8% in March, in line with its average for the quarter. This compares to cycle highs just above 67%. Meanwhile, the employment to population ratio (the share of Australians in work) remains close to historic highs.
A 0.5% rise came through for hours worked in March, after a modest decline in the prior month (-0.2%) and a solid gain in January (0.6%). Overall, hours worked lifted at a solid 0.9% pace for the March quarter, slightly outpacing the growth in employment (0.6%).
In summary | March
Today's report broadly aligned with consensus expectations, while it also likely serves to reinforce the RBA's existing views around labour market tightness. The May meeting is live for a third consecutive 25bps hike if the more hawkish majority of a split Monetary Policy Board continues to get its way. Quarterly inflation data for March on April 29 is the next key input to watch.
