Australia's unemployment rate dropped to 3.6% in September, despite the Reserve Bank's warning of a potential "turning point" in the jobs market due to multiple rate hikes. This development contradicts the anticipated effects of interest rate increases, as reported on Thursday.
The Australian Bureau of Statistics (ABS) revealed that only 6,700 jobs were added during the month, falling significantly short of economists' projection of a 20,000 increase. The participation rate also dipped by 0.3 points to 66.7%, with around 20,000 individuals transitioning from unemployment to non-participation in the labor force, resulting in a lower unemployment rate.
Simultaneously, Australia experienced a sharp population increase of 563,200 within a year, largely driven by new immigrants who contributed over 80% of this surge. Despite this rapid growth, job availability has remained consistent as employment and population growth have shown parallel trends.
To maintain the current unemployment and participation rates amidst this fast-paced population growth, it's estimated that approximately 35,000 new jobs need to be created monthly. ABS's Kate Lamb noted that although employment growth has slowed, both the employment-to-population ratio and participation rates are still near their recent record highs.
AMP (OTC:AMLTF) Chief Economist Shane Oliver pointed out persistent labor shortages in Australia's businesses amidst these developments. He highlighted the potential pressure on the Reserve Bank to raise rates at its November meeting due to rising underemployment concerns – a potential challenge for home hunters.
Reserve Bank board members have noted increases in underemployment and youth and medium-term unemployment rates due to aggressive interest rate increases. They predict these factors will further slow down the economy and push the unemployment rate to 3.9% by the end of this year and 4.5% by mid-2025. Despite these predictions, the current robust labor market data may prompt the Reserve Bank to contemplate a rate hike at its November 7 meeting.
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