Rates pain on the cards despite positive jobs figures

Despite some positive unemployment news, the numbers will put pressure on the RBA ahead of its next meeting - making it bad news for anyone with a mortgage.

The latest data on Australian jobs is out and it spells good news for workers. Picture: NCA NewsWire / Nicholas Eagar

Economists believe positive jobs figures will give the Reserve Bank pause for thought ahead of their next meeting, which could spell bad news for mortgage holders.

The Australian Bureau of Statistics (ABS) released February’s jobs data on Thursday, with a 0.2 per cent improvement on the 3.7 per cent seasonally adjusted rate announced in the previous month’s figures.

The data shows an increase of 64,600 jobs for Australian workers, and the number of people out of work down 16,500.

The RBA had been tipped to consider a pause in raising the cash rate in April before Thursday’s strong jobs data was released.

The latest data on Australian jobs is out and it spells good news for workers. Picture: NCA NewsWire / Nicholas Eagar

AMP Chief Economist Shane Oliver said without the overseas influence, it’s likely Thursday’s numbers would have forced the RBA board’s hand.

But the collapse of several banks in the United States, and the value of some European banks taking sharp dives, has created global economic uncertainty.

“The jobs figures were solid … taken on its own it would have tipped the reserve bank over into another rate rise,” said Mr Oliver.

“The other thing that will influence the RBA is the closure of banks globally … that would be a bit of a warning sign that global economies are going to slow down, causing the RBA to hold fire.”

“So I do think we're still on track for a pause in April, but we’ll have to wait for inflation and retail figures to come out in coming weeks.”

RBA Governor Philip Lowe in a recent speech indicated he would be examining key economic data ahead of the April meeting, with retail figures and CPI reports from the ABS to be released on March 28 and 29 respectively.

…there are signs of a slowing jobs mkt: the emp/pop ratio & participation rate look to have peaked, hrs worked may be slowing & Indeed job postings are falling. On its own Feb jobs figures would point to another RBA hike but signs of slowing & global bank issues point to a pause pic.twitter.com/ftgtaqT7Y1

— Shane Oliver (@ShaneOliverAMP) March 16, 2023

Mortgage comparison website RateCity.com.au crunched the numbers and determined a rate rise of a further 25 basis points in April would cost the average owner-occupier, with a $500,000 loan and 25 years remaining, and extra $78 per repayment.

Australia's unemployment rate at 3.54% in February 2023 is a smidgen above the 48-year low of 3.42% in October 2022. #fx#audusd#usdaud#auspol#ausecon#business#[e-mail]/V7tbqP0rcu

— CommSec (@CommSec) March 16, 2023

“The underemployment rate is currently almost three percentage points lower than it was before the pandemic, with falls over the past year underpinned by stronger growth in hours worked than in employment,” said ABS’ head of labour statistics Bjorn Jarvis.

“In February, there were also no major disruptions that affected people's‘ ability to work their normal hours, such as the widespread sickness or natural disasters that we have seen over recent years.”

BIS Oxford Economics Head of Macroeconomic Forecasting Sean Langcake said Thursday’s ABS data “largely unwound” the weak figures revealed last month.

“There was an unusually large cohort of people waiting to start jobs,” he said.

“With this group flowing into employment this month, the market has largely returned to where it was at the end of 2022.

“The labour market continues to track in a very strong position, and is starting to generate faster wage growth.”

Though he went on to say the unemployment rate is expected to drift up again this year due to interest rate hikes cooling demand.