Another robust labour market result

A recurring theme this year has been the resilience of the Australian labour market in the face of slow economic growth and an RBA cash rate target that has been unchanged since last November’s 25bp hike. That story continues to hold, as this week’s data told us that the labour market remained robust not only last month but through the third quarter overall. Employment rose by more than 64,000 in September 2024, mostly due to an increase in full-time jobs; the participation rate and the employment to population ratio both set new record highs; and the unemployment rate was unchanged at just 4.1 per cent.

That’s – mostly – good news for the full employment half of the RBA’s dual mandate. However, Martin Place will judge there’s a bit too much good news here for comfort, in that the economy still looks to be operating above what the central bank thinks is full employment. That in turn continues to complicate the price stability part of its mandate. It follows that – absent any big negative shocks – the last two monetary policy meetings of this year are still unlikely to deliver a pre-Christmas rate cut. As we have been saying for some time now, we will have to wait until next year for interest rate relief.

More detail on labour market numbers and the rest of this week’s releases below. Also, many thanks to those of you who were able to join me for this week’s webinar on Industrial Policy. For those who couldn’t make the live session but are still interested in the topic, you can access the recording here.

Australian economy adds 64,100 jobs in September

The ABS Labour Force report for September 2024 said the number of employed people rose by a seasonally adjusted basis 64,100 last month. That left total employment up 0.4 per cent on the August 2024 outcome and 3.1 per cent higher than in the same month last year. Full-time employment rose by 51,600, while part-time employment increased by 12,500. This was a much stronger result than the market’s expectation for an increase in employment of 25,000.

Monthly hours worked in all jobs were up five million (or 0.3 per cent) over the month to be 2.4 per cent higher in annual terms.

In further evidence of labour market strength, the participation rate rose to new record high of 67.2 per cent in September and the employment to population ratio also set a new record of 64.4 per cent.

The Bureau has revised down the estimated unemployment rate for August 2024 from 4.2 per cent to 4.1 per cent, and September’s joblessness rate was unchanged from this rate. There was even a slight fall in the number of unemployed people, which was down by 9,200 persons from August. The median market had expected the unemployment rate to be unchanged this month, albeit at the pre-revision rate of 4.2 per cent.

The underemployment rate fell from 6.5 per cent in August to 6.3 per cent in September, while the underutilisation rate also declined, dropping from 10.6 per cent to 10.4 per cent.

What else happened on the Australian data front this week?

According to the ABS, there were 286,998 registered births in Australia in 2023, down 4.6 per cent or 13,686 births from 2022. Australia’s total fertility rate (TFR) last year was 1.5 births per woman, a new record low and down from 1.63 in 2022. Australia’s TFR has been below the replacement rate (of around 2.1) since 1976. The Bureau also noted a long-term decline in the fertility of younger mothers. (Over the past 30 years, the TFR of women aged 15 to 19 has fallen by more than two-thirds) alongside a continued increase for older mothers (the TFR of women aged 40 to 44 has almost doubled over the past 30 years). Together these have driven a rise in the median age of mothers to 31.9 years.

The ABS said there were 658,810 short-term visitor arrivals to Australia in August 2024, an increase of 9.2 per cent on the same period last year. Total arrivals were 1,656,470, an annual increase of 7.2 per cent. The same month also brought 46,620 international student arrivals. That was 2,150 students fewer than those who arrived in August 2023.

The ANZ-Roy Morgan Consumer Confidence Index was virtually unchanged in the week ending 13 October 2024, slipping by 0.1 points to 83.4 index points. There were falls for the ‘current financial conditions’ (down 2.6 points) and ‘future financial conditions’ (down 3.2 points) subindices that were largely offset by gains for the ‘short-term economic confidence’ (up two points), ‘medium-term economic confidence’ (up 1.2 points) and ‘time to buy a major household item’ (up 1.7 points) subindices. The ANZ-Roy Morgan survey measure of weekly inflation expectations also fell, dropping 0.3 percentage points to 4.6 per cent.

Last Friday, the ABS published its Monthly Business Turnover Indicator for August 2024. On a seasonally adjusted basis, turnover fell 0.7 per cent over the month in the 13-industry aggregate but was up 1.9 per cent over the year. The monthly decline was driven by a 3.5 per cent fall in Mining turnover, particularly in oil and gas, along with a price-driven fall for iron ore. There was also a 2.9 per cent monthly decline for Information media and telecommunications, due to a fall in publishing turnover.

Other things to note . . .

• The October 2024 RBA Bulletin includes articles on whether housing investors pass though changes in interest cost to rents (the authors reckon the key driver of rents is not interest rates but rather the level of housing demand vs the available stock of properties), small business economic and financial conditions (the message here is that the economic environment has been more challenging over the past year due to slowing demand and elevated costs. But most small businesses have been able to maintain profit margins while sizable pandemic driven cash buffers have provided resilience), and developments in wage growth have occurred across different pay-setting methods.
• Also from the RBA, Sarah Hunter, Assistant Governor (Economic) gave a speech on inflation expectations – why they matter and how they are formed. Related, a new RBA Research Discussion Paper on How households form inflation and wage expectations.
• Angus Taylor, the Shadow Treasurer, gave the 2024 Warren Hogan Memorial Lecture and spoke on A new agenda for productivity and fiscal discipline.
• Research from the e61 Institute on non-compete clauses (NCCs), job mobility and wages in Australia finds increased use of NCCs is associated with lower rates of job mobility and of wage growth.
• An evaluation of Australia’s macro policy responses to COVID-19 judges that although policy stimulus was initially successful in terms of reducing the peak rate of unemployment, it then lingered for too long and also overcompensated economic agents. Helpful summary here.
• The AFR analyses Australia’s government spending splurge in eight charts.
• How to make a land tax more equitable.
• The ABS reckons Australia’s leading cause of death is on the brink of change, as the number of dementia-related deaths (9.1 per cent of the total and on the rise) is closing in on the current leading cause, Ischemic heart disease (9.2 per cent and falling).
• A submission from the Productivity Commission on Principles for a National Water Agreement.
• A selection of pieces on the winners of this year’s “Nobel Prize” in economics: Daron Acemoglu, Simon Johnson and James Robinson for studies of how institutions are formed and affect prosperity.
• The Economist magazine looks back at a year which has already seen 67 counties hold national elections involving more than a billion votes.
• The IMF and World Bank will hold their 2024 Annual Meetings next week. Ahead of that, the Fund is releasing chapters from its flagship publications. Currently available: Insights from the recent inflation episode and Understanding the acceptability of structural reforms, Macrofinancial stability amid high economic uncertainty, and Putting a lid on public debt.
• Also from the IMF, this working paper looks at Europe’s shift to EVs against a backdrop of rising global competition, especially from China.
• Two from the FT. First Martin Wolf argues China’s economic ills are serious but not incurable. Second, a Big Read on how Saudi Arabia is tightening its belt.
• The IEA’s World Energy Outlook 2024 argues the world is ‘set to enter a new energy market context in coming years, marked by continued geopolitical hazards but also by the relatively abundant supply of multiple fuels and technologies. This includes an overhang of oil and liquefied natural gas (LNG) supply coming into view during the second half of the 2020s, alongside a large surfeit of manufacturing capacity for some key clean energy technologies, notably solar PV and batteries.’ The report also predicts low-emissions sources will generate more than half the world's electricity by 2030; that demand for coal, oil and gas will peak by the end of the decade; that global CO2 emissions ‘are set to peak imminently’; and that despite all this, ‘the world is on course for a rise of 2.4 °C in global average temperatures by the end of the century, well above the Paris Agreement goal of limiting global warming to 1.5 °C.’
• Olivier Blanchard and Angel Ubide offer their critique of last month’s Draghi report on The Future of European Competitiveness.
• This BIS Bulletin examines the evidence on nearshoring in the Americas.
• On links between supply chain shortages, firm market power, and inflation.
• The WSJ profiles economist Michael Pettis.
• Also from the WSJ, Greg Ip on the outlook for US interest rates.
• Interesting speech from Jason Furman in defence of the Dismal Science (the discipline of economics, that is, not the AICD’s economics podcast!)
• The New Bazaar podcast has a wide-ranging interview with Paul Krugman. Transcript.
• After 100 days of Keir Starmer, the These Times podcast asks, why are Britain’s main political parties so useless?