The unemployment rate stood at a seasonally adjusted 3.7% last month, undershooting market consensus that had forecast the jobless rate to hit 4%.
Around 52,000 were looking for work, which was more than offset by 116,000 individuals who found jobs.
“The increase in employment in February followed a weaker-than-usual outcome in December (-62,000), and a modest increase in January (15,000),” ABS head of labour statistics Bjorn Jarvis said.
The slight easing in the jobless rate was broadly expected by economists who said the shift in labour market dynamics around which people start and leave work may have overstated the two-year-high increase in January.
The ABS earlier pointed to more people taking annual leave in the first month of the year potentially affecting the labour survey figures.
“In its January release, the ABS noted evidence of changes in labour market dynamics [where] more people taking leave in January compared to the levels before the pandemic and more people are waiting to start employment in the next four weeks,” ANZ senior economist Blair Chapman said.
Noting a pattern that dates back to 2022, the ABS said the number of employed people in February that were unemployed is slowly increasing – from around 4.3% in the two years prior up to 4.7% this year.
The pre-pandemic average was around 3.9%.
“In contrast, we again only saw around 3.1% of employed people in January leaving employment by February, which was similar to last year and has remained relatively constant over time,” Mr Jarvis said.
“This shows that there is a wider gap than we would usually see between the numbers of people entering employment and leaving employment.”
The large jump in employment numbers brought the employment-to-population ratio to 64.2%.
“The employment-to-population ratio was around where it was in August 2023, given employment growth and population growth have both been around 1.4% over the past six months, and there has been relatively little change in unemployment,” Mr Jarvis said.
NAB head of market economics Tapas Strickland noted, “The labour market has softened since mid-2023 reflecting a mix of population recovery and slowing labour demand.”
More Australians return to work
As more people started or returned to work in February, the number of hours worked rose by 2.8%.
The latest gain follows six months of generally declining hours worked, but still below where they had been in the middle of 2023.
“The changing dynamics have influenced aggregate hours worked, the change in employment, and (to a lesser extent) the unemployment rate in recent January releases,” Mr Chapman said.
“In non-seasonally adjusted (NSA) terms, aggregate hours worked always decline in January, [while] aggregate hours worked in February typically exhibit the opposite seasonal pattern, with hours growth increasing over a five- or six-year period.”
Bucking the data, however, was the participation rate which fell to 66.6%.
Despite the noted increase in people starting or returning to work, fewer individuals were working or willing.
Choppy figures cloud RBA’s view
Per usual, the RBA will closely watch today’s labour figures to assess the impact of rate hikes and determine their direction after keeping the cash rate unchanged in March.
The decline in the unemployment rate runs opposite to the RBA forecast.
However, economists believe the latest figures were volatile at best, and more data is needed for the RBA to make a more accurate assessment.
“The current cohort of labour market data is not matching the weak growth picture in the National Accounts or other second-tier labour market data like jobs ads and applicants per job from Seek,” CBA economist Belinda Allen said.
“We will need this March labour force numbers to understand how volatile this print is given the seasonality issues apparent in the survey.”
The March labour force survey will be released ahead of the next RBA Board meeting in May.
Meanwhile, experts over at accounting firm RSM Australia support the Board’s decision to keep the cash rate on hold until at least the third quarter of 2024.
“As long as the labour market maintains its strength, the RBA can afford to overlook weakness in economic activity and concentrate on managing inflation,” RSM economist Devika Shivadekar said.
“A robust labour market not only sustains wage growth but also supports consumer demand. Hence, as long as labour market resilience persists, the RBA has sufficient grounds to remain vigilant.”
The Board in its March monetary policy statement reiterated the risks high labour costs pose to inflation, hence the decision to hold.
According to the ABS, wages in Australia have risen faster than the rise in the cost of living.
High wage growth tends to be inflationary especially if productivity doesn’t rise with it.
But the central bank is slightly optimistic on this front, noting that unit labour costs have begun to moderate slightly in the past two quarters.
The RBA expects the unemployment rate to accelerate to 4.2% in the June quarter and land at 4.3% by the December quarter.
Photo by Arlington Research on Unsplash
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