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Job Market Seemingly Impervious to Rate Rises

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2023-04-13

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It’s all about lags at the moment in economic analysis and policymaking in the wake of all those rate rises from the Reserve Bank in the past year.

Judging by the March labour force data released yesterday, the RBA and Federal Treasury will be waiting a while longer for the lagged impact of the rate rises to catch up to the jobs market.

After yesterday’s report the RBA will have March retail sales at the end of the month and the March quarter Consumer Price Index and monthly inflation indicator to consider before its next meeting on May 2.

That meeting and decision will come a week before the 2023-24 federal budget is brought down.

One outstanding part of the report was another strong set of figures for female employment which is now at record levels.

While the rate increases have hit property (perhaps temporarily), retail sales and household incomes, the labour market has remained strong - super strong in fact if the March report from the Australian Bureau of Statistics on Thursday is any sort of guide.

So strong is the labour market - 53,000 new jobs and no change in the jobless rate of 3.6% a near 50-year low - that you have to start wondering if an almighty crash is coming should the impact of all those rate rises catch up and crunch demand and send jobless numbers soaring.

That was after 63,600 new jobs in February (down slightly from the original estimate of 64,600).

The ABS reported the nation created 72,200 full-time jobs last month, taking total full-time employment to a record 9.7 million. More than 19,000 part time jobs were lost - most it seems because the positions became full time. That left 4.135 million people working part time in March.

In the wake of its decision at its April meeting to pause rate rises, Reserve Bank Governor, Philip Lowe said in a speech the halt "will provide more time to assess how the various influences on the economy balance out. At our next meeting, we will again review the setting of monetary policy with the benefit of an updated set of forecasts and scenarios.”

The strength of the jobs market this year - around 115,000 new jobs created since the start of the year and a fall of around 17,000 in the number of people unemployed of around - has defied most commentator and analyst forecasts, especially at the RBA which had expected unemployment to be edging higher and new job numbers sagging.

The ABS reported total employment lifted to 13.9 million in March although there was a small increase in the under-employment rate to 6.4%.

Lauren Ford, the head of labour statistics at the ABS, said the jobless rate remained around its 50-year low.

“In line with the increase in employment, the employment-to-population ratio increased 0.1 percentage point to 64.4 per cent, with the participation rate remaining at 66.7 per cent,” she said.

“Both indicators were close to their historical highs in November 2022, reflecting a tight labour market and explaining why employers are finding it hard to fill the high number of job vacancies.”

Ford said female employment had climbed by 81,000 over the past two months, with the female participation rate at a record 62.5%.

Among the states and territories, the number of people with a job in Victoria jumped by 1.1 percentage points.

Victoria’s jobless rate fell marginally to 3.6%, while its participation rate – which measures those with work or looking for it – increased by 0.5 percentage points.

NSW’s jobless rate increased slightly to 3.3% while in Queensland it rose by 0.1 of a percentage point to 3.9%.

The lowest jobless rate in the country remains in the ACT where it fell by 0.1 of a percentage point to 2.8%, while WA’s jobless rate tumbled by 0.4 percentage points to 3.4%.

The ABS did point out that when the number of hours worked in March is examined, the tightness of the labour market emerges.

"Seasonally adjusted monthly hours worked fell by 0.2 per cent in March 2023, following the strong 3.8 per cent increase in February, and also continued to reflect a tight labour market,” the ABS said.

“Over the past 12 months, hours worked has increased 5.5 per cent, outpacing the 3.3 per cent increase in employment. Since March 2020, hours worked have increased 8.4 per cent, compared to a 7.0 per cent increase in employment.

"The strength in hours worked relative to employment shows the high level of demand for labour, to some extent, is being absorbed by people working more hours,” Ms Ford said.

In March there was little sign of the one-off factors that have clouded jobs data off and on since early 2022. Covid and sick leave factors were not mentioned by the ABS, nor was the oddity seen in January of thousands of people employed but waiting to start work which artificially pushed the number of new jobs to a loss and then balanced out in February.

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