Unemployment rate dives as workforce participation slides, job growth stalls
Australia's unemployment rate has dipped to 3.6%, but this reduction is primarily due to a decline in the number of Australians actively seeking employment.
Decline in workforce participation and limited job creation
The Australian Bureau of Statistics (ABS) reports that only 6,700 jobs were generated in the last month, a figure insufficient to match the growth in the working-age population. The ABS has underlined that the labor market currently needs to generate approximately 37,000 jobs monthly to maintain the unemployment rate at its current level, provided the participation rate remains unchanged.
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Impact of falling participation
The participation rate, a measure of the proportion of individuals aged 15 and over who are either employed or actively seeking employment, saw a notable drop from 67% to 66.7%. This reduction in participation played a significant role in pushing the unemployment rate lower.
Assessing the labor market
The ABS's Head of Labour Statistics, Kate Lamb, pointed out, "The fall in the unemployment rate in September mainly reflected a higher proportion of people moving from being unemployed to not in the labor force." While the participation rate declined, it still remains higher than levels observed before the COVID-19 pandemic.
Ms. Lamb also suggested that some of the weaknesses in job creation might be attributed to statistical fluctuations. Over the past two months, the average monthly employment growth was approximately 35,000 people, aligning with the average growth witnessed over the past year.
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Shift towards part-time employment
Although employment growth has been positive, there has been a decline in hours worked for the second consecutive month, with a 0.4% decrease in September, following a 0.5% drop in August. The recent shift towards part-time employment has been significant, while full-time job creation has plateaued over the last six months.
Impact on small businesses
Small business owners, in particular, are feeling the pinch. As the cost of living continues to rise, some are considering cutting working hours for their employees due to declining business conditions. Smaller businesses are especially sensitive to these economic shifts, leading to a reduction in the work hours they can offer.
Multiple jobs and economic pressures
Rising economic pressures, combined with the increasing cost of living, have led to a record number of Australians holding multiple jobs. Nearly a million Australians are now working two or more jobs. This trend is particularly evident among those who find it challenging to meet their financial obligations with a single job.
Uncertainty in the job market
Economists remain cautious, highlighting that this data does little to change the current outlook. It is still viewed as a 25% chance of a rate increase in November. Further data, especially the upcoming consumer price indices (CPI) for September, will play a crucial role in determining the Reserve Bank's decisions on interest rates.
Future of the labor market
The current landscape of the job market remains uncertain, and the Reserve Bank's next move will depend on various economic indicators. For now, while unemployment rates have declined, concerns over workforce participation and job creation persist. The upcoming CPI data release will be a pivotal moment in assessing Australia's economic direction.