Lending Association

Strong jobs market

The Australian jobs market is stronger than all those commentators, economists and experts thought a month ago when the January labour force report from the Australian Bureau of Statistics showed a second month of weak data after December’s surprise.

Economists, politicians, media writers, brokers and analysts all went on about how the labour market cooled in January (and December) because the unemployment rate rose to 4.1 per cent, hours worked fell and there was a small rise in the number of people unemployed.

But the February labour force report from the ABS blew all that up on Thursday with the jobless rate back down to 3.7 per cent, a massive 116,000 new jobs (and 14,500 new jobs for January) and a surge in hours worked — just as the bureau thought.

The ABS said on Thursday that the rebound in the February employment data took the labour market back to where it was six months ago — a situation that the gun shy Reserve Bank will not be happy about.

And the immediate market reaction to Thursday’s report was more nonsensical about how the result was “stronger than forecasts” when the forecasts were flawed anyway and ignored the ABS analysis in the February report.

(This was a bigger repeat of what we saw at the start of 2023 — a weak January report, a rise in the jobless rate (to 3.7 per cent) followed by a surge in new jobs in February (65,000) and hours worked and a fall in the jobless rate to 3.5 per cent.)

A year later and the Head of Labour Statistics, Bjorn Davis, said on Thursday that “With employment growing by around 116,000 people, and the number of unemployed falling by 52,000 people, the unemployment rate fell to 3.7 per cent. This was around where it had been six months earlier.”

“The increase in employment in February followed a weaker-than-usual outcome in December (-62,000), and a modest increase in January (15,000, originally reported as just 500).

“This equates to 70,000 more employed people in February than there were in November and a growth rate consistent with the underlying trend,” he said.

The news saw the Aussie dollar regain the 66 US cent mark — up around 0.15 per cent in the half hour after the 11.30 am release of the data. The ASX 200 eased a few points.

In its commentary on the January figures, the ABS suggested — quite strongly for statisticians — that the story wasn’t the rise in the unemployment rate, the number of people unemployed, the small number of people who found new jobs and a fall in hours worked but in the large number of people waiting to start work.

“…similar to January 2022 and 2023, the increase in the unemployment rate in January 2024 coincided with a higher-than-usual number people who were not employed but who said they will be starting or returning to work in the future.”

“While there were more unemployed people in January, there were also more unemployed people who were expecting to start a job in the next four weeks,” Bjorn Jarvis said.

On Thursday of this week he pointed out that the large increase in employment in February followed the larger than usual numbers of people in December and January who said they had a job and were either waiting to start or return to the position.

“This translated into a larger-than-usual flow of people into employment in February and even more so than February last year,” which he said in January could very well happen.

“In 2022 and 2023, around 4.3 per cent of employed people in February had not been employed in January. In 2024 this was higher, at 4.7 per cent, and well above the pre-pandemic average for 2015 to 2020 of around 3.9 per cent.”

“In contrast, we again only saw around 3.1 per cent of employed people in January leaving employment by February, which was similar to last year and has remained relatively constant over time. This shows that there is a wider gap than we would usually see between the numbers of people entering employment and leaving employment.”

He said that the number of people in February waiting to start a job was “back to around what we would usually see” suggesting that the surge in new jobs seen in February will slow when the March data is reported in mid-April.

The ABS said that given the relatively large increase in employment, the seasonally adjusted employment-to-population ratio rose 0.4 percentage points to 64.2 per cent and the participation rate rose 0.1 percentage point to 66.7 per cent

“While higher than December and January, they remained below their historical highs of 64.4 per cent and 67.0 per cent in November.

“Both the employment-to-population ratio and the participation rate in February were around where they were in August 2023, given employment growth and population growth have both been around 1.4 per cent over the past six months, and there has been relatively little change in unemployment,” Mr Jarvis said.

The big rise in February (and the extra jobs found for January) meant that hours worked jumped 2.8 per cent in the month after easing over the latter months of 2023 and then down 2.5 per cent in January.

“This followed a six-month period since July of generally declining hours worked. Hours worked in February were around where they had been in August, but still below where they had been in the middle of 2023,” Mr Jarvis said.