BCEC Monthly Labour Market Update – March 2025

• A modest rebound in employment after February’s surprise fall in jobs.
• Unemployment remains low and stable.
• Global uncertainty adding to likelihood of a May interest rate cut.

Labour market steady in pre-election jobs figures

The key interest in the labour force estimates for March lay in clues as to whether February’s sudden fall in jobs heralded the start of an easing in the labour market or just statistical noise. The March figures didn’t give much away, with around half the fall in jobs in February recovered in March, and the unemployment rate hovering between 4.0 per cent and 4.1 per cent.

Total employment increased by 32,200 jobs in March, with growth shared between full- and part-time positions. We suspected the fall in jobs observed in February was partly a statistical artefact of 0.4ppt drop in the estimate of participation rate, and something of a ‘correction’ to January’s record high participation rate of 67.2 per cent. Somewhat surprisingly, revisions to February’s figures show a bigger drop in participation (-0.5ppt to 66.7%) and slightly larger drop in employment (-57,500 jobs). Over half of those jobs were recovered in March and participation crept back up to 66.8 per cent.

Amidst all the volatility, the key take-away is that the labour market remains tight. The unemployment rate barely shifted, with only rounding tipping it from a revised 4.0 per cent to 4.1 per cent in March.

The recent Commonwealth Budget provided an update on the Treasury’s reading of the direction of the labour market. Compared to the Mid-Year Economic and Financial Outlook (MYEFO) update from December, the Treasury now sees the unemployment rate stabilising at 4.25 per cent in the forward years, rather than 4.5 per cent. This is more in line with the Reserve Bank’s current forecasts, and reflects an ongoing downward revision of the level of unemployment seen as consistent with keeping inflation within the 2-3 per cent target range.

The big change was in the forecast for employment growth this year. The Budget estimate for growth through to the June Quarter 2025 is 2.75 per cent, a full 1 ppt higher than the 1.75 per cent forecast in MYEFO. For this growth in jobs to be consistent with a modest rise in the unemployment rate, the Budget projects a participation rate of 67.25 per cent for the June Quarter.
This seems an unlikely outcome given the 67.2 per cent recorded in January was the highest participation rate on record, and the rate has since moderated to 66.8 per cent. With the benefit of the March 2025 figures, we can calculate that reaching the Budget’s employment forecast will require a steady increase of 70,000 jobs in each of the coming three months. In our assessment, the Budget forecasts for both employment growth and participation are on the high side, but leaving the unemployment rate projection roughly consistent with recent data.

The spectre of weakening global growth as a result of US tariff policy has raised expectations that the RBA will cut rates again when they next meet in May. There’s nothing in the March labour force figures to dampen those expectations. The critical piece of information will be the March quarter inflation figures due at the end of this month.

A boom in renewable energy jobs… or in power prices?

Last December’s MLMU noted the rapid jobs growth in the electricity, gas, water, and waste services industry. The latest quarterly release of detailed estimates by industry show this has continued to be the fastest growing sector, with employment up by 9.6 per cent in the year to February 2025. Over the past 5 years, employment in the sector has expanded by 37.7 per cent, eclipsing even healthcare and social assistance (+29.2%).

Longer term growth in the industry has been strong in both the electricity supply sector (32.7% over five years) and gas supply (55.0%). But what’s behind this employment growth? And what might be the consequences for consumers?

The relationship between employment and prices is complex and driven by a number of factors ranging from overall economic conditions to energy policy and the development of reneweable energy production.

The growth in workers in electricity supply could be interpreted as part of Australia’s much vaunted green energy boom, or as an omen of further increases in power prices. We suspect you’d get quite different views on these issue depending on whether you asked Mr Albanese or you asked Mr Dutton.