Will higher unemployment stop a rate hike?

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Carrington Clarke (0:40)

We've got fresh jobs figures from the ABS, and it shows worsening unemployment. So will this stay the hand of the Reserve Bank from hiking rates on Melbourne Cup Day? Welcome to ABC Business Daily.

Michael Janda (0:56)

And I'm the ABC's business editor, Michael Janda.

Carrington Clarke (0:59)

Michael, thank you for joining us. We've just got this new data. We've been trying to work through it. It's a little bit messy.

Michael Janda (1:05)

It is quite a complicated one. Revisions and rounding and...

Carrington Clarke (1:11)

Yes, exactly. Is a 4.7% unemployment rate actually worse than it was last month?

Michael Janda (1:17)

It's both up point one of a percentage point, but also it was an upwardly revised 4.7% in August. So it does make sense when you understand the rounding involved and that these two numbers are treated separately.

Carrington Clarke (1:31)

So let's do the headlines first. So unemployment rate is 4.7% for September. They've revised August to 4.7% as well.

Michael Janda (1:41)

From 4.6% previously.

Carrington Clarke (1:43)

4.6% when they released it originally.

What we're also seeing is a change to the underemployment rate. Again, this is all seasonally adjusted up from 6.2% to 6.3% and the participation rate actually falling by 0.2% down from 67% down to 66.8%. But it's really the number of jobs that is probably going to be the most important thing, I think, where we've seen a loss of 39,300 jobs for this month. Now monthly data notoriously jumps up a lot, but that does seem like a significant figure.

Michael Janda (2:19)

It is a significant figure. They were basically all part-time jobs. There was actually an increase in full-time employment reported in the ABS estimates for September. But the interesting thing, I've seen one early economist note that came out that pointed to the fact that for the first time in a very long time, in many years, we have now seen a quarterly fall in the number of Australians employed. So that's quite significant and kind of looks through some of the month-to-month volatility. We've also seen a fall in the employment-to-population ratio, which I know a lot of economists look at as an overall picture of how strong the labour market is, because it kind of factors how many people are in work or looking for work, that participation rate, and then of course how many of those people can find jobs.

The interesting thing with that is again, looking through the monthly data, I had a quick look through all the ABS charts that come with their release, and there's been a pretty consistent downward trend in that employment-to-population ratio since a peak in about January 2025 So since the start of 2025, that's fallen off from a peak, I think it was about 64.4 percent, and we're now in the latest seasonally adjusted figures being 63.6 percent for that employment-to-population ratio. So I think whichever way you cut the numbers, it does fit with the story that the jobs market is in a gradual deterioration from its peak levels. What the 4.7 percent unemployment rate indicates, along with that loss in employment in the month, is maybe that deterioration is not quite as gradual as the RBA, the Reserve Bank has been thinking it has been.

Carrington Clarke (4:05)

That they were effectively ahead of schedule, when you look at what the Reserve Bank was predicting was going to happen, they thought it would be around 4.5 percent unemployment rate by the end of this year. We got there quicker than they expected. Is that cooling enough for them potentially to cool their jets when it comes to interest rate rises?

Michael Janda (4:23)

Well, we got that those forecasts of 4.5 percent by the end of the year were before they raised rates in September. Now, of course, that rate hike in September is after this survey data was taken. So there's absolutely zero effect, not even a psychological effect from that rate rise on this job starter.