Domestic employment tumbled in December, boosting the odds of the Reserve Bank of Australia (RBA) pivoting to monetary easing. The economy shed 65,000 jobs, a largely unexpected outcome led by the biggest monthly drop in full-time employment since the height of the pandemic.
The seasonally adjusted unemployment rate remained at 3.9% in December, according to data released by the Australian Bureau of Statistics (ABS). The fall in employment followed larger than usual employment growth in October and November, a combined increase of 117,000 people, with the employment-to-population ratio and participation rate both at record highs in November. The seasonally adjusted participation rate fell 0.4% to 66.8%, back to around the September level. The employment-to-population ratio also fell, down 0.4% to 64.2%, the lowest employment-to-population ratio since May 2022, but still 1.9% higher than in March 2020.
Source: Bloomberg
While the December employment fall was large, the number of employed people was still 52,000 higher than in September. Looking over the past twelve months, seasonally adjusted employment increased by an average of 32,000 people per month, showing reasonably strong underlying growth during 2023.
Both the unemployment and underemployment rates remained relatively low and the participation rate and employment-to-population ratio relatively high, suggesting that the labour market remains tight. The underemployment rate remained at 6.5% and the underutilisation rate remained at 10.3%, in line with November.
In trend terms, many of the key indicators still point to a tight labour market. However, the increasing unemployment rate since November 2022, along with the rising underemployment rate and a slowdown in the growth of employment and hours worked, suggest that the labour market is starting to slow. This contributes towards the case that the RBA is probably at its peak official cash rate, with the next move more likely to be down rather than up.
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