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Australia’s Job Market Loosens Even as Unemployment Sticks Low – BNN Bloomberg

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(Bloomberg) — Australia’s labor market may be approaching an inflection point with key early indicators now turning down, even as the jobless rate holds around 4% in defiance of the Reserve Bank’s aggressive tightening campaign.

Australia probably added 30,000 roles and unemployment edged down to 4% in May, economists predicted ahead of data on Thursday, in what would be the 28th month of the rate hovering at 3.5%-4.1%. Yet underutilization has ticked up and the pace of hiring has slowed, with Bloomberg Economics estimating the economy needs to generate 37,000 jobs a month to remain where it is.

The following charts highlight the emerging weaknesses in the job market. 

Unemployment for migrants who arrived in Australia during the past five years climbed to 5.9% in April from a low of 5.5% in June 2023, based on a 12-month moving average calculated by Moody’s Analytics. 

By comparison, migrants who have been in the country more than five years saw unemployment edge up just 0.2 percentage points to 3.3%, while Australian-born workers experienced a rise to 3.9% from a low of 3.6%.

“When labor markets slacken, it’s the newest members of the job market that feel the pain first,” said Moody’s economist Harry Murphy Cruise. “With new job creation slowing in Australia, there are fewer and fewer opportunities for new graduates and overseas arrivals to find employment. In turn, youth unemployment and unemployment for new migrants is rising faster.” 

The jobless rate for 15- to 19-year-olds has risen almost 5 percentage points in the past 18 months, also pointing to a softening in the labor market and a potential precursor to further weakness in the economy ahead.

“Trends in youth unemployment tend to lead broader labor market turning points,” said James McIntyre at Bloomberg Economics. “With economic growth already showing signs of weakness, longer job searches and more competition for positions reinforces our view that the unemployment rate will rise quickly over coming months.”

Australian job advertisements have similarly been in decline since plateauing around mid-2022. 

The sharpest fall has been recorded in a gauge by jobs site Seek Ltd. while the government’s internet vacancy index has also been on a downward trajectory. ANZ Bank’s job ads have recently shown an uptick, driven by government spending primarily in healthcare and social assistance. 

The final chart above highlights the worldwide trend of surprisingly low headline unemployment despite synchronized tightening cycles at a number of central banks.

The RBA expects unemployment will peak at 4.3% next year — lower than the 4.5% consensus of economists, who reckon rising immigration and a sharper-than-expected economic slowdown mean there is more labor market slack than currently visible.

Uncertainties around the outlook suggest the RBA will hold rates at a 12-year high of 4.35% for some time yet. Money market pricing implies the RBA will only begin its easing cycle in the second half of 2025.

“We’re really trying to gauge what’s happening to what we call full employment,” RBA Assistant Governor Sarah Hunter said at a conference in Sydney last month. “We’re seeing job vacancies track down a little bit. We are seeing the unemployment rate, the youth unemployment rate, tick up a little bit. The pace of employment growth has slowed a little bit. So all of that is consistent with the labor market softening.”

–With assistance from Garfield Reynolds.

©2024 Bloomberg L.P.

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