BCEC Monthly Labour Market Update – December 2024
— Unemployment rate creeps back to 4 per cent, despite strong jobs growth. —
— Male participation rate the highest in over a decade, up 0.3ppt to 71.4 per cent. —
— The renewables transition may be starting to show in employment by industry figures. —
Uptick in unemployment rate obscures another solid month for the labour market
The recent benign monthly inflation figure for November sparked growing expectations for an interest rate cut when the Reserve Bank Board meet in February. Analysts will have been looking for signs of some softening in the labour market to firm up those expectations.
They got just the opposite.
Save for one blip, the labour force survey results for December provide close to a clean sweep of indicators of a tight labour market. The number of employed people grew by 56,300 (0.4 per cent). The participation rate rose 0.2 percentage points, back to its record high of 67.1 per cent. At 71.4 per cent – up 0.3ppt – the male participation rate is at its highest monthly level since June of 2013. Aggregate hours worked and monthly hours per worker both increased, and underemployment fell.
The blip was the rise in the unemployment rate, back up to 4.0 per cent. A closer look reveals the rate barely changed at all, rising just enough to go from being rounded down to 3.9 per cent to rounded up to 4.0 per cent. An expanding working-age population and increased participation added 66,700 people to the labour force. The labour market absorbing 56,300 of new labour force participants into work is undoubtedly a strong result, but that also led to the total number of unemployed people rising by 10,300.
The RBA Board meets on the 17th of February. The critical piece of information shaping the Board’s decision on interest rates will be the inflation figures for the December 2024 quarter, to be released at the end of January. With core inflation running above the RBA’s 2-3 per cent target band in the October (3.5%) and November (3.2%) monthly estimates – and a nuanced change in RBA communications to reference ‘the middle of the target range’ rather than just within the target range – we think the quarterly CPI figure would need to surprise on the downside to make way for a rate cut.
The January labour force figures aren’t released until after the RBA meets, so this month’s figures mark the last key update on the pulse of the labour market. If the December quarter inflation figures are in the ‘grey area’, the ongoing strength of the labour market will have the Board reluctant to loosen monetary policy settings.
The year of 2024 in Review
With the last of the monthly data in for calendar 2024, it’s an opportunity to take stock of how the year compares over almost 50 years since the current labour force survey series began in 1978.
The post-pandemic recovery is shaping up as quite a remarkable period for the Australian labour market. Continued strong immigration in 2024 saw the working age population expand by an estimated 2.5 per cent, the second fastest annual rate in the series behind 2023 (2.9%). Employment also grew by 2.5 per cent for the year, well above the longer-term average of 1.9 per cent.
The annual unemployment rate came in at 4.0 per cent, the third lowest on record since 1978 and eclipsed only by the two prior years (2022 and 2023), both with rates of 3.7 per cent. However, 2024 did rewrite the record books with the highest overall participation rate (66.9%), well above second placed 2023 (66.6%) and third placed 2022 (66.3%).
This was due to female participation reaching an all-time high for 2024 (62.9%), combined with a reversal in the long run decline in male participation.
The trend of a growing share of part-time employment may have stalled. From just under 16 per cent in the late 1970s, this has doubled to stand at 31.0 per cent for 2024. This was the 7th highest annual part-time share recorded, having peaked at 31.6 per cent from 2016 to 2018.
The Net Zero Transition?
We’ve been watching the rapid growth in jobs in the ‘Electricity, Gas and Water’ industry with interest. Recent employment by industry estimates show jobs in this sector grew by 24 per cent over the year to November 2024, compared to 2.4 per cent across all industries, with most of those jobs created in QLD. It’s also been the fastest growing industry over the longer term, with jobs up by 31 per cent in the past five years.
Detailed estimates by industry subdivision, while potentially subject to large sampling variability, show employment in ‘Electricity Supply’ to be making the largest contribution, while ‘Gas Supply’ employment has shrunk. This may well be reflecting the transition to renewables, though we note jobs growth has also been strong in the sectors’ subdivisions of ‘Water Supply, Sewerage and Drainage’ and ‘Waste Collection, Treatment and Disposal’.