The ratio of job seekers to job vacancies has increased from a situation where it was almost one to one.(Unsplash: ConvertKit)
Official jobs data from the Australian Bureau of Statistics (ABS) estimates that nearly 76,000 jobs were added to the economy last month, sending unemployment down to 3.6 per cent.
The strong figures came as a shock to economists, who were typically expecting 15,000 jobs to be added last month and the unemployment rate to remain steady at 3.7 per cent.
The proportion of Australians aged 15 and over either in work or looking for it — known as the participation rate — also increased to a record high of 66.9 per cent.
The participation rate rose 0.2 percentage points for women, to 62.7 per cent, and remained at 71.2 per cent for men.
A greater share of women in Australia are employed than ever before, with their employment to population ratio and participation rate both at record highs in May, Bjorn Jarvis from the ABS said.
That lifted the proportionof Australians in jobs to an equal record high.
Combined with a rapid increase in the population, that sawthe number of employed people in Australia surpass 14 million for the first time.
Just before the start of the pandemic almost 13 million people were employed in Australia, Mr Jarvis noted.
Unemployment and underemployment
Economist Callam Pickering, from jobs website Indeed, said there appears to be little risk of a sharp rise in unemployment in the near term.
Australia's job vacancy rate is 2.8 per cent, which is still around twice as high as was considered normal before the pandemic, he noted.
In the current jobs market, jobseekers are still spoiled for choice and that simply isn't consistent with a spike in the unemployment rate.
It wasn't all good news though, with the rate of underemployment increasing to 6.4 per cent, up from 6.1 per cent, which pushed the underutilisation rate to 10 per centfor the first time since April last year, Mr Pickering said.
Hours worked fell 1.8 per cent in May, but that followed a 2.7 per cent jump in April, and there were fewer employees off sick than the previous year.
Even though hours worked fell in the latest month, their strength since late 2022, relative to employment growth, shows the demand for labour in a tight market is being met, to some extent, by people working more hours, Mr Jarvis explained.
While more people than usual worked less because they were sick (4.2 per cent, compared with a May pre-pandemic average of 3.5 per cent), it was much less than in May 2022 (5.8 per cent) during the Omicron period.
Rate rise odds increase
For mortgage borrowers, the dark side of Australia's very resilient jobs market is the increased likelihood the Reserve Bank might again raise interest rates next month.
Financial information service Refinitiv shows the markets are currently pricing in roughly 50/50 odds of rates rising at the July RBA meeting in a bit less than three weeks time.
But Sean Langcake from Oxford Economics Australia believes that will not be the last rate hike, based on this month'sstrong jobs numbers.
The labour market remains very tight, which will contribute to stronger wage growth over 2023 – compounding the upcoming increase in award wages, he wrote.
We expect to see two more rate hikes before the RBA takes a protracted pause.
The Commonwealth Bank is saying a rate rise next month is a 50/50 proposition and will depend largely on monthly inflation data out at the end of this month.
AMP's Diana Mousina believes a rate rise next month is more likely than not.
Despite weak readings in the domestic business confidence and conditions and consumer sentiment this week, we think today's employment figures will keep the RBA concerned that the tight labour market will keep wages growth elevated and jeopardise its 2-3 per centinflation target, she wrote.
Which means another 0.25 per centrate hike is likely in July and the risk of another one in August or September.
The RBA appears to have become more impatient in waiting for inflation to slow and has given up on the argument about the lagged impact of interest rate hikes.
https://www.abc.net.au/news/2023-06-15/jobs-unemployment-abs-may-2023/102482902
