A spike in unemployment on flat employment as hiring patterns change
A large spike in Australian unemployment and flat employment looks affected by changing hiring patterns.
Australia's labour force survey was very weak in January, with the unemployment rate spiking from 3.9% to 4.1% – which was the highest rate since January 2022 – as employment broadly flatlined after a 0.4% decline in December.
The ABS suggests that this weakness could reflect changing COVID-era hiring patterns related to the category of “people who were not employed with job attachment”, which comprises people “waiting to start work” and people who were “long-term away from work” because they had taken unpaid leave of more than a month.
Specifically, the ABS said that, “while there were more unemployed people in January, there were also more unemployed people who were expecting to start a job in the next four weeks”, while we also note that there were more people than usual taking more than a month of unpaid leave.
Seasonally adjusting the data, we calculate that there were an additional 17K “people who were not employed with job attachment” in January, comprising 11K more people who were waiting to start work and an extra 6K people taking more than a month of leave.
These people will be counted as employed either when they start work – presumably in February or March – or return from leave.
However, to demonstrate their potential effect on today’s data, if they had been counted as employed in January, employment would have risen by a rounded 18K in the month (or 0.1%), while the unemployment rate would have been unchanged at 3.9% (the exact unemployment rate would depend on the split of these extra people “with job attachment” between unemployed and not in the labour force).
None of this alters the conclusion that the labour
market is loosening, something that is very clear from the fact that job vacancies have fallen from their peak and unemployment has risen
from last year’s lows, but it suggests that the RBA is unlikely to overreact to
the alarming headline numbers.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy, contributing to the investment decisions of the firm. Kieran has long experience as a macroeconomist in both the private and public sectors. He has worked most recently as Chief Markets Economist for National Australia Bank and was previously Chief Economist, Australia and New Zealand, for Barclays Bank and ABN Amro Bank/RBS. Kieran also worked as Principal Adviser on the macroeconomy and budget policy in the Commonwealth Treasury and Director of Forecasting.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
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