Australian workers brace for pain


Thursday’s ABS labour force release was another case of numberwang, with the unemployment rate rising to 3.7% despite 55,000 jobs created.

As noted by CBA economist Stephen Wu, “the unemployment rate remains much lower than implied by its historical relationships with other labour market indicators such as surveyed measures of unemployment expectations and job ads”.

“The underemployment rate was unchanged at 6.3%. It stands well above the trough of 5.8% seen in February, but has been little changed over the second half of this year”:

Labor market slack

However, “this month’s labour force report was influenced by the Aboriginal and Torres Strait Islander Voice referendum”.

“The referendum was held on 14 October, and the survey’s reference period was from 1-14 October. The ABS noted that the referendum had a temporary effect on employment, hours and participation in October”.

“Given that, we could expect some payback next month, perhaps more so in employment, given that was stronger than expected”.

Moreover, the youth unemployment rate typically leads the broader labour market, and the “youth unemployment rate rose further in October, to 9.2%, the highest since late 2021”:

Youth unemployment rate

AMP chief economist, Shane Oliver, published a bunch of charts on Twitter (X) on Thursday showing that “leading labour market indicators point to a slowdown ahead”.

These include rising applicants per Seek job Ad:

Applications per job ad

Rising consumer unemployment expectations:

Unemployment expectations

As well as AMP’s Jobs Leading Indicator, which “also points to softer jobs growth below the ~35k/mth needed to stop unemployment rising”:

AMP leading jobs indicator

The outlook for wage growth has also worsened given the rise in the underutilisation rate, according to Oliver:

Labour underutilisation vs wages

Indeed, the latest RBA Statement of Monetary Policy forecasts that it will take many years for Australian real wages to recover from the losses of the past three years:

Real wages

It is going to be a long and painful road ahead for Australian workers.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.