Australia’s jobless rate jumps to 3.7pc, easing fears of further RBA rate hikes

The unexpected jump in the unemployment rate came as the number of employed people dropped by 4300 in April.

Unemployment remains at around 50-year lows. Picture: Jane Dempster/The Australian

Unemployment has climbed to 3.7 per cent in April from 3.5 per cent, as a surprisingly weak month for the labour market buoyed hopes the Reserve Bank would not hike rates as soon at its next meeting.

The unexpected jump in the jobless rates came as the number of employed people dropped by 4300, according to seasonally adjusted figures from the Australian Bureau of Statistics.

A 22,800 increase in part-time workers in April was more than offset by a 27,100 drop in full-time employment, the data showed.

This compared to the consensus forecast among economists for a 25,000 lift in employment, and for an unchanged jobless rate.

Despite the worse-than-anticipated labour force figures, unemployment remains at around 50-year lows. The latest data will also likely ease pressure on the RBA to deliver a 12th rate hike when it meets next month.

Jim Chalmers said the jobless rate remained “remarkably low”.

“We have expected for some time that the unemployment rate will tick up a bit as a consequence of higher interest rates, combined with some pretty serious global uncertainty, and that’s what we’re seeing in these unemployment numbers,” the Treasurer said in Perth.

“But it is still pretty remarkable that we enter this period of substantial global uncertainty with unemployment with a three in front of it,” he said.

There was worse news for younger workers, with the youth unemployment rate lifting from 7.8 per cent to 8.6 per cent – the highest in almost a year, but still far below the 12 per cent pre-pandemic level.

ABS head of labour statistics Bjorn Jarvis said the “small” drop in the number of people with jobs in April came after the economy created 39,000 jobs over the first three months of the year.

The ABS figures showed the employment-to-population ratio fell 0.2 percentage points to 64.2 per cent, while the labour force participation rate eased by 0.1ppt to 66.7 per cent.

“Even with these falls, both indicators were still well above pre-COVID-19 pandemic levels and close to their historical highs in 2022,” Mr Jarvis said.

The underemployment rate, which measures the proportion of workers unable to find additional hours of work, fell to 6.1 per cent, from 6.2 per cent in April.

Despite fears of a slowing economy and rising financial stress among households, the labour market still remains at its tightest since the 1970s, and well below official estimates of full employment.

Ivan Colhoun, the chief economist in NAB’s institutional division, said the latest figures were “consistent with the view that the Australian labour market is beginning to ease but is a long way from easy”.

This week’s wages figures showed an acceleration in pay rates to a decade-high of 3.7 per cent, but that pay pressures remained within the central bank’s forecasts.

Mr Colhoun said the wages and now the disappointing jobs numbers “together reduce the risk the RBA would opt to raise rates again as soon as June”.

The RBA was still likely to deliver another hike to 4.1 per cent by July or August, he said.

The Reserve Bank’s 11 rate rises since May last year have yet to blunt demand for workers, with nearly 440,000 job vacancies, or nearly twice the pre-Covid number and against the 528,000 unemployed people in the latest ABS jobs numbers.

Close to nine in 10 businesses say they are struggling to find employees, according to NAB.

The RBA forecasts unemployment will lift to 4 per cent by the end of the year, and for it to trend upwards from there.