A surprise uptick in unemployment in April has stoked fears the labour market may be starting to turn, amid predictions that rising interest rates may spark tens of thousands of job losses in 2023.
Australian Bureau of Statistics (ABS) figures published on Thursday estimated that employment fell by at least 4000 people last month, despite economists expecting a rise of about 25,000 jobs.
It pushed the unemployment rate from 3.5 per cent to 3.7 per cent, which is still quite low by historical standards, but is being seen by experts as a sign the economy is slowing rapidly.
“Today’s data reflects signs of easing in the labour market, as demand pulls back in response to higher interest rates,” KPMG economist Michael Malakellis said.
“An increase in the unemployment rate is not welcome, but it does give the RBA some evidence that pressures are easing and that they are on track to bring inflation back to the target zone.”
Although it’s possible April’s jobs data is a blip in an otherwise strong jobs market, economists and the RBA have been expecting Australians to start losing their jobs in greater numbers this year.
Current forecasts predict about 50,000 jobs could be shed across the economy over the last half of 2023, with the RBA forecasting unemployment to rise to about 4.4 per cent by the end of 2023.
And after the surprise unemployment rise on Thursday, some economists are now saying there’s a risk these forecasts could undershoot the potential magnitude of likely job losses.
Commonwealth Bank senior economist Belinda Allen said the figures were “significantly weaker” than expected, with markets having expected unemployment to remain unchanged.
“Today’s labour force report does present upside risk to the RBA’s near-term unemployment rate forecasts,” Ms Allen said on Tuesday.
“The RBA’s forecasts in their May statement expect the unemployment rate to average 3.6 per cent over the three months to June 2023.”
Blip on the radar?
Veteran economist Saul Eslake took a different view, saying that while the rise in the jobless rate might suggest a turn in the labour market, it could be another quirk in the ABS figures.
“It’s tempting to say that this might be the first sign of a long-expected easing in labour market conditions, following 11 consecutive increases in interest rates,” Mr Eslake said.
“However, one, it’s a pretty small increase in the unemployment rate [and] two, we saw something like this in January when employment fell.”
He said the labour market is still likely to turn at some stage amid rising interest rates, but that it’s possible unemployment could rise without a huge number of job losses.
That’s because migration is picking up rapidly this year after COVID-19, meaning the size of the labour force is likely to increase, potentially adding to the unemployment rate.
“It’s possible that the unemployment rate could rise without significant job losses on a net basis, but people will find it harder to get work.”
Westpac economist Ryan Wells said he was also “hesitant” to assume the rise in unemployment in April was a sign of an emerging downturn in the jobs market.
The April jobs survey covered the Easter holidays, and hours worked – which rose in the month – suggests resilience, he said.
“Given the difficult seasonality pertaining to the Easter period and the broader context at play, April’s results should be examined with a degree of caution.”