MORE Australians lost a job than found one for the first time in 10 months, in a development that has surprised economists and will keep the Reserve Bank on its toes.
However, analysts don’t expect the shock result to have much bearing on the chances of further interest rate cuts.
Australia’s jobs market remains remarkably resilient, with unemployment holding strong at 4.1 per cent, the Australian Bureau of Statistics reported last week.
Almost 53,000 more people were out of work in February than the previous month, defying predictions 30,000 new jobs would be added to the economy.
That was largely caused by fewer older Australians returning to work, ABS head of labour statistics Bjorn Jarvis said.
“In contrast, we continue to see growth in employment for people aged between 15 and 54 over the year.”
The most striking part of the data was a 0.4 per cent fall in participation from its record high to 66.8 per cent, said JP Morgan economist Tom Kennedy.
“Australia’s February labour data were messy, though on balance softer than we expected,” he said.
The unusually large drop in participation, with the number of unemployed falling by 11,000 despite the decline in jobs, will likely unwind in subsequent months if historical trends repeat, Mr Kennedy said.
Given the volatile data and ongoing strength in the labour market, ANZ economists Aaron Luk and Adam Boyton don’t expect the decline to have a material impact on the RBA’s rate-setting decisions in isolation.
“We maintain our stance that this easing cycle will be a shallow one, with only one more rate cut to come in August,” they said.
The strength of the labour market has been a bright spot in Australia’s economy, with unemployment remaining below the historical average of 6.3 per cent since 1972, despite high interest rates.
The Labor-aligned McKell Institute found unemployment has been lower under Anthony Albanese than any Prime Minister since Gough Whitlam, averaging 3.8 per cent.
Underemployment also fell, with the rate of workers looking for more hours down 0.1 percentage points to 5.9 per cent.
Treasurer Jim Chalmers said the data showed some softening.
“While there are still challenges in our economy and people are still under pressure, we still have the lowest average unemployment of any government in the last 50 years,” he said.
“Low unemployment and much lower inflation is a remarkable combination when you look at our historical experience and what’s happening in other countries.”
But Labor cannot take all the credit.
Unemployment was already trending down under the Coalition, with Mr Albanese inheriting a jobless rate of 3.9 per cent in May 2022, down from the Covid-impacted peak of 7.5 per cent in July 2020.
Labor has also been accused of artificially tightening the market by overseeing massive expansion in non-market sector jobs, such as healthcare and education, which has made it harder for other industries to find workers.
Reserve Bank governor Michele Bullock has cited labour market tightness as a reason for not needing to lower interest rates earlier, as peer economies had.
Given Thursday’s figures showed sustained strength in the jobs market, quarterly inflation and wages data will be more critical to RBA decision-making, said NAB head of market economics Tapas Strickland.
In its latest meeting minutes, its board said “the strongest reason” supporting its cash rate cut was the signal from moderating price and wages growth.
“NAB expects the RBA will continue to build confidence that while the labour market is tight, it isn’t excessively tight so as to hamper a sustained moderation in inflation,” Mr Strickland said.
The central bank will have to wait until the April 30 quarterly CPI print to see whether inflation has continued to moderate, despite unemployment.
