Commentary Directory

Australian employment expanded 0.5% MoM or 64,900, to 14.11 million in August as the total number of unemployed individuals fell at the same rate, down -0.5% MoM. The unemployment rate remained unchanged at 3.7%, but the underemployment rate did tick up to 6.6%. The participation rate improved a slight 0.1 ppt to 67.0%. While employment did improve, the total number of hours worked fell -9 million (-0.5% MoM) which explains the increase in the underemployment rate. The YoY gain in the total number of hours worked has slowly decelerated from a peak of 10.3% YoY in January to just 3.7% YoY in August, the lowest since May 2022. It is also worth noting that despite the marginal decline in the total number of unemployed, that number is still up 8.5% YoY.

In general, Australia’s labor market is still healthy and has so far survived the sharp increase in interest rates. However, there are signs that businesses are starting to lower their demand for workers, whether it be through decreased hours or less hiring. At the moment, it doesn’t appear that there is a trend of layoffs, and most of the softening in the labor force is through underemployment (up 0.6 ppts over the last year) or through new workers entering the labor force and becoming unemployed instead of immediately finding a job (participation rate up 0.3 ppts over the past year, unemployment rate up 0.2 ppts over the last year). These dynamics should be favorable to the Reserve Bank of Australia in that wage growth should decelerate but not at the cost of mass layoffs.