Australia’s Unemployment Rate Returns to Record Low in February

Staff at Lux Cafe serve food in Melbourne, Australia, on Oct. 22, 2021. Darrian Traynor/Getty Images

An employment surge has seen Australia’s jobless rate fall to a 48-year low across June and December 2022.

According to the latest data from the Australian Bureau of Statistics (ABS), the unemployment rate dropped from 3.7 percent in January to 3.5 percent in February as 64,600 Australians found a job during the period.

“With employment increasing by around 65,000 people, and the number of unemployed decreasing by 17,000 people, the unemployment rate fell to 3.5 percent,” ABS head of labour statistics Bjorn Jarvis said.

“This was back to the level we saw in December.”

Staff at Village Cinema serve customers in Geelong, Australia, on June 22, 2020. Quinn Rooney/Getty Images

The participation rate, an indicator of the economy’s active workforce, climbed slightly by 0.1 percent to 66.6 percent, back to its December level.

Meanwhile, the underemployment rate, which measures the portion of the workforce that wants to work more hours, slipped from 6.2 percent to 5.8 percent in February.

Between jurisdictions, the Australian Capital Territory had the lowest jobless rate at three percent, followed by New South Wales at 3.2 percent, and Queensland and Tasmania at 3.7 percent.

In addition, the Northern Territory reported the highest employment growth at 0.7 percent.

What Was Behind the Rise in February?

Many economists believed the uptick was due to the unusually high number of Australians postponing the start of their jobs in January.

BIS Oxford Economics head of macroeconomic forecasting Sean Langcake said the February report had captured this portion of the workforce, undoing the weak labour market performance in January.

Likewise, Employment Minister Tony Burke said the February results partly reflected Australians taking some well-deserved leave over January.

“In January, more people than usual delayed the start of their job, contributing to the uptick in unemployment,” he said in a statement.

“We still expect unemployment to moderate over the coming months on the trajectory we outlined at Budget.”

Employment and Workplace Minister Tony Burke speaks during the jobs and skills summit at Parliament House in Canberra, Australia, on Sept. 1, 2022. Martin Ollman/Getty Images

While the minister noted that the labour market still remained strong, he said there were too many Australians working in insecure jobs, pointing to 2.7 million casual employees with no paid leave entitlements in November 2022.

Burke also said that the federal government’s economic plan was about getting wages growing again in a responsible way to help Australians combat the high cost of living pressures.

“It is encouraging to note that this is already starting to work, though the government remains mindful that we need to see inflation moderate in order to secure real wages growth,” he said.

The Potential Impact on Interest Rates

Langcake believed the drop in the national jobless rate would likely prompt the Reserve Bank of Australia (RBA) to lift the official cash rate in the next board meeting.

Early this month, the RBA increased the cash rate for the 10^th consecutive time, taking it to 3.6 percent.

While the RBA board hinted at further interest rate hikes in the coming months, it had softened its tone, leading to speculation about a potential pause.

“The labour market continues to track in a very strong position and is starting to generate faster wage growth,” Langcake said in comments obtained by AAP.

Under this condition, Langcake said the central bank would want to ensure labour cost pressures remained under control with higher interest rates.

Regarding the outlook of the labour force, the economist said the unemployment rate was likely to trend up in 2023 as higher interest rates dampened demand for workers.

Meanwhile, Westpack Bank chief economist Besa Deda said the latest workforce figures were unlikely to affect the RBA’s upcoming interest rate decision following the demise of the Silicon Valley Bank (SVB) in the United States.

The sudden collapse of SVB has sparked fears of a contagion in the U.S. banking sector, prompting the U.S. Federal Reserve to step in with a bailout.

“I think it makes it very tough for the central bank to be hiking in this sort of environment, and I think there is a pretty strong chance that rate hikes are taken off the table,” she said.