The Australian Bureau of Statistics (ABS) released the data on Thursday, revealing a sharp drop in the participation rate from a record 67.3 per cent in November to 66.8 per cent in December. Despite the alarming decrease in employment, the unemployment rate for the month held firm at 3.9 per cent, matching economists’ forecasts and the previously reported rate for November.
What caught analysts off guard was the net loss of 65,000 jobs, a stark contrast to the anticipated addition of 15,000 jobs. The brunt of this downturn was felt in the full-time job sector, which witnessed a plunge of 106,600 positions – the most substantial drop since the pandemic’s initial wave.
Another unexpected development was the decline in the participation rate, indicating a drop in the proportion of the population actively seeking employment. This shift from a revised record of 67.3 per cent in November to 66.8 per cent in December raised concerns about the workforce’s overall confidence in finding employment opportunities.
The ABS attributed the poor results to a larger-than-usual employment growth in the preceding months, with October and November seeing a combined increase of 117,000 people in the workforce. David Taylor, ABS’s head of labour statistics, pointed out that while the December employment fall was substantial, the number of employed individuals still stood 52,000 higher than in September.
Despite the recent setback, the labour market has generally surprised economists with its resilience since the disruptions caused by the COVID-19 pandemic. The Reserve Bank, in its November forecast, predicted a gradual increase in the jobless rate to approximately 4.25 per cent by the end of 2024. However, the recent figures might prompt a re-evaluation of these predictions when the board meets in early February.
Economists remain cautious about interpreting a single monthly data point, but concerns about a deteriorating labour market are evident. Oxford Economics Australia’s lead economist, Ben Udy, anticipates a continued softening in 2024, forecasting an unemployment rate approaching 4.5 per cent by year-end.
David Bassanese, chief economist for BetaShares, urged caution in interpreting the sharp drop in employment, highlighting the volatility in recent job numbers. He suggested that any upward drift in the unemployment rate throughout 2024 would provide the Reserve Bank of Australia (RBA) with more room to consider rate cuts over the year.
The state-wise breakdown revealed that New South Wales maintained the lowest jobless rate at 3.4 per cent, unchanged from November. Victoria’s rate held steady at 4 per cent, while Queensland showed improvement, decreasing from 4.4 per cent to 4.3 per cent. The Australian Capital Territory (ACT) and Western Australia (WA) experienced a slight uptick, both reporting a 3.9 per cent unemployment rate.
In light of the challenging economic indicators, the market’s initial reaction was relatively limited. The Australian dollar experienced a marginal drop of about 0.1 US cent, while the stock market modestly pared its losses for the day. As Australia navigates these economic uncertainties, all eyes are on the Reserve Bank’s decisions and potential measures to address the evolving job market dynamics.
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