Is it another sign of a weakening job market with a 65,000 drop in new jobs last month, or will these losses be offset as they were three times last year?
The Australian Bureau of Statistics’ labor force data for December not only revealed a significant job loss but also a smaller drop in unemployment. These factors combined to keep the jobless rate steady at 3.9%.
However, hours worked continued to decline, as they have for much of the second half of 2023. The ABS wondered in its analysis whether the substantial drop in December jobs was a response to the substantial increases in the previous months.
David Taylor, the ABS head of labor statistics, stated in Thursday’s release, “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 reaching record highs in November.”
“While the December employment drop was significant, the number of employed individuals remained 52,000 higher than in September. Over the past twelve months, seasonally adjusted employment increased by an average of 32,000 people per month, indicating reasonably strong underlying growth during 2023.
“With the decline in both employment and unemployment in December, the seasonally adjusted participation rate dropped 0.4 percentage points to 66.8 percent, returning to levels similar to September,” he said.
“The employment-to-population ratio also decreased by 0.4 percentage points to 64.2 percent. This was the lowest employment-to-population ratio since May 2022 but still 1.9 percentage points higher than March 2020.”
“The strength in employment in October and November, coupled with the decline in December, reflected changes in the timing of employment growth in the last few months of 2023 compared to earlier years.”
“Both the unemployment and underemployment rates remained relatively low, and the participation rate and employment-to-population ratio remained relatively high, suggesting that the labor market remains tight,” Mr. Taylor said.
Both monthly hours worked and employment declined by 0.5% in December.
“Continuing the pattern observed throughout the second half of 2023, the annual growth rate in hours worked continued to slow, dropping to 1.2 percent, well below the annual employment growth rate of 2.8 percent.”
“The slowdown in hours worked since the middle of 2023, following strong growth during 2022-23, brought total monthly hours worked in December back to levels similar to February,” Mr. Taylor noted.
The number of full-time jobs declined by over 106,000 in the month, while the number of part-time jobs increased by 41,000, resulting in an overall decline of around 65,000. This suggests that some full-time jobs transitioned to part-time roles during the break.
December revealed signs of a softening job market, although not enough to definitively conclude, especially after significant declines in 2023 were reversed and surpassed by substantial increases in the following months.
However, these developments are unlikely to prompt an early rate cut by the Reserve Bank. If January’s data shows a significant rise, it will signal a solid labor market with minor imperfections. Yet, another substantial drop and a rise in the jobless rate above 4% will likely reignite discussions about potential rate cuts.