Unemployment rate 3.7%, lower chance of an RBA hike in June?

After consecutive months at 3.5%, the seasonally adjusted unemployment rate rose to 3.7% in April.

The number of employed Australians decreased by 4,300, while there were 18,400 more unemployed people.

ABS Head of Labour statistics Bjorn Jarvis pointed out that high migration numbers could partially account for these figures.

"The small fall in employment followed an average monthly increase of around 39,000 people during the first quarter of this year,” Mr Jarvis said.

The employment to population ratio also slightly decreased to 64.2%, as well as the participation rate, which dropped 0.1% to 66.7%.

Mr Jarvis however reminded Aussies that these numbers are still indicative of an extremely tight labour market.

“Even with these falls, both indicators were still well above pre-COVID-19 pandemic levels and close to their historical highs in 2022,” Mr Jarvis said.

These results are slightly above predictions from economists from the big four banks, which all anticipated the 3.5% unemployment rate holding except for the Commonwealth Bank, which predicted a slight increase to 3.6%.

Seek have also revealed that the number of new job adverts was down 19.1% in April '23 compared to '22, which could suggest a slowdown to growth.

The outlook for June

While people losing their jobs is no cause for celebration, there are a couple of reasons why many will be encouraged by these latest unemployment figures.

The previous unemployment rate of 3.5% was the lowest in half a century, according to the RBA, and low unemployment is typically correlated with higher consumer spending.

In the most recent monetary policy statement, RBA Governor Dr Philip Lowe pointed to high employment growth as a 'competing force' acting against high interest rates to keep spending high.

An increase in unemployment might help Dr Lowe and the Reserve Bank board justify not increasing the cash rate further in June.

The figures also suggest that the imbalance in the labour market is beginning to correct itself, with supply lagging behind demand in the labour market in the past year.

Several industries are struggling acutely with labour shortages, so the slight decrease to the participation rate combined with a high influx of migrants might be an encouraging sign for many firms that finding suitable workers might start to get easier.

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