Employment growth stalls
Employment rose only modestly in September, on a seasonally adjusted basis, to reverse the revised -12,000 decline recorded for August.
The 3-month average employment growth is now nowhere near high enough to prevent unemployment from rising, given high population growth and participation rates.
Much of the employment growth over the past year has been in government-funded and non-market roles, and especially healthcare and social assistance, but as this employment growth gradually dries up there isn't much left in the tank, it appears.
With the participation rate at record highs, the seasonally unemployment rate spiked to a 4-year high of 4½ per cent, well above the top of the forecast range of market economists.
The underutilisation rate also rose to a 13-month high of 10.9 per cent.
Furthermore, the youth unemployment jumped to 10½ per cent, suggesting a far weaker environment for employment trends, particularly since a rise in youth unemployment tends to precede a worsening unemployment dynamic across the wider economy.
The wrap
This release, while only one data series, was a nasty set of numbers for policymakers, and in truth a bit of a shock to markets.
Reserve Bank of Australia forecasts had expected the unemployment rate to peak at 4.3 per cent and remain at that level until 2027, yet here we are already at 4½ per cent and rising.
The 3-year government bond yield initially fell by 12 basis points on the news and the ASX 200 stock market index surged to new highs at above 9,100, as market pricing for the likelihood of an interest rate cut on Melbourne Cup Day in November jumped to around a 3 in 4 chance...in spite of some residual concerns around September quarter inflation.
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In other news, private new home sales jumped by 26 per cent in the past month, according to the Housing Industry Association, driven by first homebuyers, owner-occupiers, and investors:
Source: HIA
The likely drivers included rising established prices, falling interest rates, and changes to LMI policies, reported Chief Economist Tim Reardon.
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