BCEC Monthly Labour Market Update – February 2025

— Surprise 52,800 drop in the number of persons employed. —
— Unemployment rate remains at 4.1 per cent thanks to big drop in participation. —
— Direction of labour market difficult to read amidst volatility and revisions to previous estimates. —

Surprising fall in jobs goes against the grain

On face value the latest labour force estimates suggest the labour market softened appreciably in February. The number of people employed fell by 52,800 (0.4%) from January’s estimate, ending a run of 10 consecutive monthly increases. Job losses were broadly spread, with falls in the estimates for women and men, in full-time and part-time work, and across the majority of states and territories.

But we mustn’t get too carried away with an employment estimate for February that goes rather against the grain, and contrasts with other more positive labour market data.

Despite the decline in job numbers, the number of people in Australia who were unemployed in February also fell by 11,200, leading to a headline unemployment rate that remained at 4.1 per cent over the month. Underemployment has also fallen marginally, and hours worked per worker remained virtually unchanged. Both data points suggest the Australian labour market remains tight.

So what squares this particular circle? Well, a lot has to do with some unusual volatility in the estimated labour force participation rate in Australia over recent months. According to ABS data, an estimated 63,900 people – mainly women – left the labour force in February. But it’s worth recalling from last month’s update that the published female participation rate for January 2025 reached an all-time high of 63.5 per cent. And as we foreshadowed last month, a revision to those figures was always on the cards.

And so it has proven.

The national labour force participation rate for women fell to 62.8 per cent in February. Men’s participation also fell, contributing to a decline in the overall participation rate by 0.4ppt. This looks to be the main reason for the fall in this month’s employment figures, and the reduced size in Australia’s labour force explains why the published unemployment rate has held station at 4.1 per cent.

The same thing happened just over a year ago, with a sudden 71,000 drop in the estimated employment count in December 2023. That turned out to be an aberration, with employment surging back to new highs within two months. Don’t be surprised if we see a similar response to this month’s result.

Are older workers leaving the workforce?

As we’ve just highlighted, Australia’s labour force shrank by 64,000 people according to the latest ABS release, with employment and unemployment counts both falling.

To the extent that there are any systematic factors to explain the reduced labour force participation rate, one candidate put forward by ABS Head of Labour Statistics Bjorn Jarvis is a fall in the number of older workers choosing to re-enter the labour market.

And data on employment by age supports this as a conjecture. There were 38,000 fewer men aged 55+ in part-time employment in February compared to the same month in the previous year, and 22,000 fewer part-time female workers.

Whether this pattern endures is something to keep under close review. Australia can ill afford the erosion of such an experienced and highly skilled workforce, and should do everything possible to attract and retain older workers.

Labour market data won’t drive a pre-election rate cut

The window for the Federal election has narrowed to May 3, 10 or 17. That leaves just one opportunity for a pre-election change in interest rates, with the Reserve Bank Board scheduled to meet at the end of this month.

These latest figures will be the RBA’s last update on the strength of the labour market before their next call on interest rates.

We think the uncertainty around those figures means the drop in jobs won’t impact on their outlook for the labour market.

The Board will have the benefit of the monthly inflation data for February, which is due out next week, but not a full quarterly CPI update.

We saw an uptick in core inflation in January’s monthly CPI – albeit still within the target range – and a stronger than expected 0.6 per cent growth in GDP for the December quarter.

Add to this uncertainty around price impacts of US trade policy and the spectre of another round of power price increases, we expect the RBA will keep rates on hold as they wait to see the how the effects of the previous cut flow through.

The inevitable election sweeteners in the upcoming Federal Budget may also stay the RBA’s hand.

We’ll be closely scrutinising the Budget’s labour market forecasts.

We’ll get at least the March labour force figures – possibly also April’s if the election is held on May 17 – to help us give you a pre-election assessment.