Australian Bureau of Statistics figure has come in above the much-anticipated threshold of 4% for the first time in two years.
ABS head of labour statistics Bjorn Jarvis said with employment remaining stable and the number of unemployed people rising by 22,000, it pushed the unemployment rate higher.
“This was the first time since January 2022 that the unemployment rate had been above 4%,” he said.
However, just as in January 2022 and 2023, the rise coincided with a higher-than-usual number of people who weren’t working but said they’d be starting or returning to work in the future.
This may indicate people waiting to start new employment, on holiday, or not working to care for children on school holidays.
In trend terms in January, the ABS said the jobless figure remained steady at 3.9%.
Participation rate remains high
The seasonally adjusted participation rate remained steady at 66.8% while the employment-to-population ratio fell marginally to 64.1%.
Both rates remained close to their recent historical highs and well above pre-pandemic levels.
Seasonally adjusted, hours worked during the month fell by 2.5%, reflecting the traditional January summer holiday period.
The fall in hours worked continued the general slowing seen in the data since mid-2023.
“Since October 2023, the annual growth rate in hours has slowed considerably, down to 0.7% in January and well below the annual employment growth of 2.6%,” Mr Jarvis said.
Full-time employment also fell during January although part-time employment increased.
NSW has lowest unemployment rate
State-by-state, unemployment came in lower than the national average in New South Wales, steady in South Australia, and higher in all other states and territories.
The Northern Territory recorded the highest unemployment rate in January at 4.4%.
The ABS said the January figures were also impacted by floods in Queensland.
In a rare consensus, Australia’s big four banks were all tipping January’s jobless figure to come in at 4%.
Jobs data shows weak economic growth, CBA says
The Commonwealth Bank of Australia says the loosening in the labour market has gathered momentum in line with very weak economic growth.
The bank’s head of Australian economics Gareth Aird noted trend monthly employment growth slowed to 7,400 new jobs in January.
“The economy needs to generate around 33,000 jobs a month to keep the unemployment rate from rising on an unchanged participation rate,” he said.
Mr Aird said the unemployment rate was on a clear upward trend.
Seasonal skew
He noted the ABS’s caveat on the January figures likely being impacted by people who had jobs but were not working, suggesting the unemployment rate may fall in February.
However, he said the figure was in line with the bank’s view that weak economic growth would see the unemployment rate rise more quickly than the Reserve Bank of Australia expected in 2024.
This month, the RBA revised its forecast from 4.2 to 4.3% by the end of 2024; CBA expects it will rise to 4.5% by the end of the year.
Mr Aird said the loosening labour market will also help drop services inflation as wages pressure eases.
RBA urged to cut cash rate this year
“We believe RBA rate cuts will be required this year to prevent the unemployment rate rising much above 4.5%,” he said.
CBA reiterated the bank’s stand that sees the RBA starting a cash rate easing cycle in September with 75 basis points of cuts by the end of 2024 and a further 75 basis points in the first half of 2025.
The bank's peers NAB and ANZ also noted the seasonal nature of the January data, saying the RBA was likely to wait for the February jobs figures before drawing any conclusions.
That data is due on 21 March - two days after the RBA's monetary policy meeting.
ANZ said there was no change to its view the RBA would keep the cash rate on hold until November, although the bank noted risks may be skewing to an earlier start to an easing cycle.
Image by Timon Studler on Unsplash
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