Economists expected Australia’s unemployment rate to tick lower to 4.0% in February, giving back some of January’s heavy losses.
However, nobody was expecting the unemployment rate to collapse by 0.4% to 3.7%, on the back of massive 116,000 jobs growth and a 0.11% decline in the participation rate:
Source: Alex Joiner
The underemployment rate also ticked lower by 0.11% to 6.58%.
Importantly, aggregate monthly hours worked rebounded by 2.84% in February to be up a soft 0.8% year-on-year.
Source: Alex Joiner (IFM Investors)
Hours worked and employment is obviously being supported by near record high growth in the working age population:
Source: Alex Joiner (IFM Investors)
However, the population was revised down significantly in February:
Source: Alex Joiner (IFM Investors)
Given that the strength in the labour market is a major determinant of whether the RBA will cut interest rates, this result has ruled out near term cuts.
That said, I remain sceptical about the veracity of this data, given job ads have collapsed, and there are around 150 applicants per job – way above pre-pandemic levels:
Based on historical correlations, the drop in the unemployment rate looks like statistical noise that will reverse over the coming months:
I am still tipping the labour market to weaken significantly this year, prompting the RBA to cut rates in the second half.
