Australia’s jobless rate holds at 3.9 per cent in December even as economy sheds 65,100 jobs

In a further sign that the Australian economy is cooling, more than 65,000 Australians found themselves out of a job in December.

More than 65,000 Australians workers found themselves out of a job in December in a further sign that the economy is cooling under the impact of higher interest rates.

While the number of part-time positions rose by 41,400 this was offset by the loss of 106,600 full-time positions, the Australian Bureau of Statistics said on Thursday, countering expectations for modest growth of 15,000 jobs.

Yet even as the number of jobs fell, the unemployment rate remained unchanged at 3.9 per cent, in line with consensus forecasts.

Preventing an uptick in unemployment was a fall in the participation rate — the share of Australia’s working aged population in work or looking for work — which dropped from a record high of 67.3 per cent in November, to 66.8 per cent.

While the headline jobless figure had remained unchanged, Oxford Economics Australia lead economist Ben Udy, said the results showed “employment collapsed” in December with a softening in the labour market now “undoubtedly well under way”.

“We expect this softening to continue in 2024 and forecast the unemployment rate to approach 4.5 per cent by the end of this year,” Mr Udy said.

“The deterioration in the labour market is clearly in full swing.”

Further indication a cooling of labour market conditions was the 0.5 per cent fall in hours worked, while the employment-to-population ratio also skidded lower.

But economists and the ABS said the softer than expected jobs result could be due to measurement issues related to the growing popularity of Black Friday and Cyber Monday sales, which had altered seasonal hiring patterns.

“As a result, the ABS hasn’t been able to capture the evolving seasonal pattern in their seasonal factors for employment,” CommBank chief economist Gareth Aird said.

The ABS noted the changes in hiring patterns in its report.

“The fall in employment in December followed larger than usual employment growth in October and November, a combined increase of 117,000 people, with the employment-to-population ratio and participation rate both at record highs in November,” ABS head of labour statistics David Taylor said.

BetaShares chief economist David Bassanese said in the face of soaring interest rates, which have risen by 425 basis points since May 2022, Australia’s unemployment rate had remained remarked resilient.

“In fact, it’s been somewhat surprising that our labour market has been so readily able to absorb record migration amid these rate hikes,” Mr Bassanese said.

Indeed, due to Australia’s surging population growth, which has risen by more than 620,000 in the past 12 months on the back of record net overseas migration, about 32,000 new jobs are required each month just to keep the unemployment and participation rates steady.

The fresh jobs report adds further weight to the view that the Reserve Bank will keep rates on hold at its first meeting for 2024, scheduled for February 5-6, as higher borrowing costs continue to weigh on the economy.

UBS chief economist George Tharenou said the odds of earlier than expected rate cuts were rising.

“If jobs and hours don’t bounce in coming months, it would allow room for the RBA to ease pre-emptively,” he said, but added inflation over the next 12 months would likely remain above the RBA’s 2 to 3 per cent target due to a combination of booming public demand, large regulated and public sector wage rises, the scheduled stage-three tax cuts and earmarked household stimulus in 2024 federal budget, due in May.

The result was in-part due to a rise in the participation rate as workers exited the jobs market altogether. Picture: NCA NewsWire / Nikki Short

According to Reserve Bank’s own forecasts, released in November, it forecast to the unemployment to rate to rise to 3.8 per cent before year’s end.

In recent communications, RBA governor Michele Bullock has also noted that the labour market has reached a “turning point”, after hovering between 3.4 and 3.8 per cent for much of the past two years.

Treasurer Jim Chalmers said the job losses were the results of global economic impact and higher interest rates, which were dragging economic growth lower. 

His opposition counterpart Angus Taylor said the December figures revealed the biggest monthly fall in employment since 1993, outside of the coronavirus pandemic.

Originally published as Australia’s jobless rate holds at 3.9 per cent in December even as economy sheds 65,100 jobs