Australia’s November Jobs Data

Australia’s November jobs data, released on Friday, shows stronger-than-expected job growth and a decrease in unemployment. However, these figures should be analyzed within the context of broader multi-month trends rather than indicating a tightening labor market.

Westpac analysts noted that a similar pattern occurred in late 2023, which turned out to be a ‘head fake’, with seasonal shifts impacting the data.

In November, employment rose by 35,600, surpassing Westpac’s forecast of +20,000 and the market consensus of +25,000. Despite this boost, the pace of employment growth is slowing, with the three-month annualized rate falling to 3.0% in November from 4.4% in September, signaling a normalization in labor market activity.

The unemployment rate fell sharply to 3.9% from 4.1%, due to a reduction of 27,000 unemployed individuals. Notably, the increase in employment was mainly from those who were previously unemployed and had been awaiting job opportunities in October, as reported by the Australian Bureau of Statistics (ABS). This transition was attributed to a softer labor supply, with the participation rate decreasing to 67.0% from 67.1%.

Westpac pointed out the atypical labor dynamics in November, characterized by a limited influx of new entrants into the workforce. Employers primarily met their hiring needs by engaging existing job seekers, contributing to a significant reduction in the unemployment rate. This rate might have remained at 4.1% if the participation rate hadn’t declined.

While these trends suggest a tight labor market, Westpac views them as part of a gradual return to normalcy after earlier strength. Employment growth and average hours worked are returning to long-term trends, even as underutilization measures like unemployment and underemployment stay historically low.

Despite the tight labor market, Westpac indicates that inflation risks appear limited, with a slowdown in wage growth suggesting the labor market is nearing a balance.

Westpac advised that these results should be examined in light of year-end seasonal volatility and emphasized the significance of monitoring multi-month trends for a clearer outlook on the labor market.