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Australian job market volatility continues amid softening: Morgan Stanley

Published 17-05-2024, 06:46 am
© Reuters.

Investing.com - April's labour data continued its recent volatility on Thursday, as jobs growth rose more than expected while unemployment rose sharply. According to analysts from Morgan Stanley (NYSE:MS) Australia, this pattern of gradual softening aligns with the expectations of RBA policymakers and is partially offset by increases in government spending, which help mitigate cyclical weaknesses.

The data for April shows an uptick in job growth, while work hours witnessed a small decline. After two months of tighter conditions, there was an increase in spare labour capacity.

Morgan Stanley analysts anticipate that this month's increase in the unemployment rate is likely overstated. They expect a potential reversal in the coming month, similar to the trend observed in January and February. The broader trend of a gradual rise in unemployment, alongside positive job growth, is likely to persist. Early indicators softened slightly faster this month, suggesting potential accelerated weakness, although this is not the central prediction.

Government spending has been a critical stabiliser for the job market, and the Federal budget is expected to continue this trend with further spending increases. Although the rise in unemployment surpasses the RBA's forecast of 4.0% for Q2, analysts believe the RBA will focus on the overall trend, which aligns with their existing narrative.

Key takeaways from the April data include exceeding job growth expectations with 38k jobs added, primarily part-time. However, increased participation resulted in a sharp rise in the unemployment rate to 4.1%. The data remains volatile, with the Australian Bureau of Statistics noting more people than usual waiting to start work, similar to the situation in January, when unemployment subsequently reversed.

Despite these fluctuations, the labour market's spare capacity continues to slowly grow, with job growth remaining positive. Forward-looking labour indicators suggest a continued gradual softening, with SEEK job ads and NAB employment intentions indicating sharper weakness this month.

Overall, economic indicators suggest a tight labour market with only a gradual easing. The unemployment rate spiked sharply to 4.1%, and underemployment rose slightly to 6.6%. This unemployment rate partially reflects more people than usual waiting to start work. Broad under-utilisation rose to 10.7% in April, while employment to population remained steady at 64%. Both male and female participation rates increased in the month. Annual employment growth was highest in Queensland, while unemployment remains highest in Victoria and lowest in New South Wales. Job growth in the month was entirely part-time. Australia's unemployment rate is gradually ticking upwards. Employment intentions fell sharply in the month. ANZ and Indeed job ads ticked up in the month, while Seek ads decreased.

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