‘Mixed signals’: Australia’s unemployment holds on Christmas staff

Australia’s unemployment rate rose slightly in December but still remains under the RBA’s forecasted figure, putting in doubt a rate cut for the first time in 17 months.

Aussie mortgage holders have received mixed news on the economy, as unemployment rose slightly in December, although below the RBA’s official target rate.

Australia’s official unemployment rate rose to 4.0 in December, up from 3.9 per cent in November.

While this is a marginal increase in the unemployment rate, overall Australia’s unemployment rate still remains remarkably low, and under the 4.3 per cent the RBA had forecast.

Australia’s unemployment rate still remains low despite today’s result. Picture: NewsWire / John Appleyard

Despite the headline figure showing more Aussies are employed, Christmas hiring could be giving a misleading impression on the overall strength of the market.

“While employment rose by a higher than anticipated 56,300, this consisted overwhelmingly of part-time roles – as expected over Christmas – while there was a full-time employment loss of 23,700 people,” KPMG chief economist Brendan Rynne said.

“At a headline level, today’s data suggests the labour market is continuing to defy the weakness we are observing in the private sector of the economy. However, the loss in full time employment in December may be an indicator of fragility in the labour market.”

According to Mr Rynne, this leaves the RBA in a tricky position ahead of its February 17-18 board meeting, with the labour market sending the board mixed signals.

“The reduction in full time employment provides some impetus for the Bank to consider a cut in the cash rate sooner rather than later,” he said.

“But there is heightened economic uncertainty at present – in particular, there are potentially inflationary consequences of trade protectionist policies adopted by the US, but they may take some time to flow through to higher prices.”

KPMG predicts the Reserve Bank should hold off from making any call on interest rate adjustments – which has been held at 4.35 per cent since November 2023 – at least until the 31 March-1 April 2025 meeting, when the new RBA monetary policy board starts.

Official figures released by the ABS shows unemployment is up 0.1 per cent on a seasonally adjusted basis.

Bjorn Jarvis, ABS head of labour statistics said with employment rising by 56,000 people and the number of unemployed increasing by 10,000 people, the unemployment rate rose to 4.0 per cent.

“The number of employed people grew by 0.4 per cent in December 2024, slightly higher than the average monthly rise of 0.3 per cent during 2024. It was also higher than the average monthly population growth of 0.2 per cent over the year,” Mr Jarvis said.

BDO economics partner Anders Magnusson said Thursday’s figures reiterate the tightness in the labour force market.

“The unemployment rate for December remained stubbornly below the RBA’s forecast of 4.3 per cent. This is close to full employment and provides substantial benefits to workers,” Mr Magnusson said.

“Inflation tends to be higher when unemployment is this low due to upward wage pressure. However, the RBA should be celebrating as we currently have full employment without the associated inflationary wage pressures.”

The ABS says 56,000 people found a job in the last month during the Christmas rush Picture: NewsWire/ David Crosling

Mr Magnusson said there were interesting factors in the labour market, with union membership data rising in August 2024 compared with the past two years.

“This could indicate increased bargaining power of workers in a market with an already low unemployment rate and decades of weak wage growth,” he said.

“These are welcome trends for workers but should be considered by the RBA in wage and inflation forecasts.”

VanEck portfolio manager Cameron McCormack said the RBA would be unlikely to make the first rate cut until later in the year following Thursday’s results.

“While unemployment has come in higher for December, it hasn’t reached a level where there is an urgency for the RBA to cut rates. The tight labour market will continue to exert upward pressure on services inflation, which is more pronounced relative to the US,” he said.

“In recent weeks, we’ve seen markets firming up on a Feb rate cut, currently at a 70 per cent probability. However, we feel this is somewhat optimistic and suspect sentiment will shift further out if Q4 CPI release later this month comes in hotter than anticipated off the back of a weaker AUD pushing up petrol prices and other key imports.”

Originally published as ‘Mixed signals’: Australia’s unemployment holds on Christmas staff