Aussie unemployment still too low, but Q1 2024 increase tipped: Oxford Economics

The Australian Bureau of Statistics has released unemployment data for October, posting a return to 3.7 per cent nationally.

While a fractional increase in the unemployment market may seem like a good indicator of disinflation, the story is more complex.

The main reason Australia’s unemployment rate climbed 0.2 per cent in October is because the participation rate increased.

Participation’s unemployment effect

The number of people looking for work informs the participation rate.

In short, a larger pool of active workers means more people are unemployed.

The participation rate has gone back to 67 per cent for October, reversing a decline seen in September.

But Australia’s economy didn’t lose any jobs last month – in fact, it added 55,000 of them.

“With employment increasing by 55,000 people, and the number of unemployed people increasing by 28,000, the unemployment rate rose to 3.7 per cent in October,” ABS Head of Labour Statistics Bjorn Jarvis said.

“This was back to around where it had been in July and August.”

Indicator not budging

Unemployment has previously hit 3.7 per cent in 2023.

We reached that point in July, and it stayed flat into August. September would see a drop back to 3.6 per cent.

And now, in October, we’ve seen it arrive back at 3.7 per cent – even while adding 55,000 jobs. `

In short, the indicator is firmly tracking sidewards, and Australia’s labour market remains historically tight.

Q1 CY24 increase tipped

Oxford Economics Macroeconomics Forecasting chief Sean Langcake has, however, tipped a change in affairs for Q1 of 2024.

“Forward indicators of labour demand have softened, and we expect this will materialise in an increase in the unemployment rate in early 2024,” he said.

“While the unemployment rate ticked up in October, overall we see this a relatively strong print, and shows the labour market continues to defy the gravity of slowing activity and softening forward indicators.”

Mr Langcake noted employment growth was concentrated in part-time positions, but, full-time positions also climbed 17,000 in October, which boosted the number of hours worked.

All in all: no signs of a great labour market shake-out yet, but, at least one expert is looking to early 2024 for a change to the hum.