Australia’s stalled hiring supports shift to slower rate hikes

AUSTRALIAN hiring almost stalled in September, while the jobless rate held steady, suggesting the Reserve Bank (RBA) is set to remain an outlier in the global drive to rapidly tighten policy.

The Australian dollar edged lower as employment advanced by just 900 people from August, well shy of a forecast 25,000 gain, government data showed on Thursday (Oct 20). No economists came close to predicting the jobs slowdown. Unemployment held at 3.5 per cent.

The release cemented expectations that the RBA will again opt for a quarter percentage-point hike next month to take the cash rate to 2.85 per cent. Governor Philip Lowe broke ranks with counterparts two weeks ago when he became the first major central banker to slow the pace of increases.

The data “supports the view that a 25 basis-point cash rate hike by the RBA is likely even in the event of an upside surprise in third-quarter CPI data which we get next week”, said Catherine Birch, a senior economist at Australia & New Zealand Banking Group.

“The result, and it will depend on next month’s result as well, increases the likelihood that we see a pause by the RBA in hiking by December.”

That’s a departure from the consensus view as most economists and financial markets expect two more quarter-point hikes this year to bring the cash rate to 3.1 per cent in December.

The RBA has raised rates by 2.5 points since May as it races to gain control of inflation in an economy where the jobless rate is seen falling to 3.4 per cent - a 48-year low - by December and holding there through mid-2023.

That labour market tightness gave governor Lowe confidence to hike swiftly. His decision this month to downshift to a smaller move, ending four consecutive half-point increases, put him at odds with global policymakers who are pressing ahead with outsized rises to crush inflation.

Today’s result will be a slight concern for Treasurer Jim Chalmers as he prepares to deliver his first budget on Tuesday after taking office in May. The nation’s fiscal position is being buffeted by floods at home and the risk of a global downturn. A hiring slowdown only adds to those challenges.

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Callam Pickering, an economist at global jobs site Indeed reckons Australian employment may have peaked, though a rapid reversal in the near term is unlikely.

“It’s hard to envision the labour market deteriorating significantly in the near term when there are still so many jobs available,” he said. “What is clear though is that filling these roles has become increasingly difficult, with skill and talent shortages now widespread.”

Today’s report also showed:

• Unemployment held at 3.5 per cent, as did the participation rate at 66.6 per cent
• Underemployment held at 6 per cent, while underutilisation edged up 0.1 percentage point to 9.6 per cent
• Full-time roles climbed by 13,300, while part-time positions fell by 12,400
• Monthly hours worked were little changed
• Employment to population ratio declined to 64.2 per cent
• Female unemployment edged up 0.1 point to 3.6 per cent, while male unemployment was steady at 3.5 per cent BLOOMBERG