Loosening jobs market eases pressure on Reserve Bank

Poppy Johnston |

Updated Treasury forecasts rising to 4.5 per cent in the next financial year.
Updated Treasury forecasts rising to 4.5 per cent in the next financial year.

The jobless rate moved back to 4.1 per cent in April, with the logged rise in the number of unemployed in part reflecting more workers than usual waiting to start a new gig.

The official numbers from the Australian Bureau of Statistics showed the unemployment rate lifting from 3.9 per cent in March, a figure that was revised up, and coming in above expectations.

The unemployment rate was higher than the 3.9 per cent tipped by forecasters but there was also a stronger-than-expected 38,500 jobs added to the economy during the month, bigger than the 23,700 pencilled in by economists.

Despite the mixed results, Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said the data was indicative of a jobs market gradually weakening.

Together with Wednesday’s weaker-than-expected wage figures, he said it was broadly consistent with the Reserve Bank’s expectations of slackening in the jobs market in response to higher interest rates.

ABS head of labour statistics Bjorn Jarvis said with employment rising by about 38,000 people and the number of unemployed growing by 30,000 people, the unemployment rate rose to 4.1 per cent and the participation rate increased to 66.7 per cent.

The jump in unemployed people in part reflected more people than usual waiting to start a new job, Mr Jarvis said, as well as more people without jobs and looking for work.

With the employment-to-population ratio holding steady at 64 per cent in April – an indication of jobs growth keeping up with a rising population – Mr Jarvis said the labour market remained tight but “less tight than late 2022 and early 2023”.

Mr Langcake said while the data was consistent with a cooling labour market, the May numbers would be affected by those workers waiting to start a new role in April and now getting to work. 

“These workers will flow into employment next month, putting some downward pressure on the unemployment rate,” he said.

The April jobs update follows a prolonged run of below-average unemployment and robust jobs growth, with the resilience curious given an economy waning in response to an aggressive round of interest rate hikes by the RBA.

Yet the jobs market is expected to weaken further, with updated Treasury forecasts from the May 14 federal budget having the unemployment rate moving from higher to 4.5 per cent in the next financial year.

It’s then expected to stabilise at that level – which is still lower than pre-pandemic levels – for a couple of years, based on the official government forecasts.