BCEC Monthly Labour Market Update – September 2024

— Nationally 64,100 jobs added in September as male full-time employment surges 1.1 per cent in a single month. —
— Unemployment rate steady at 4.1 per cent, after August figure revised down. —
— Public sector employment growth conflicting with monetary policy efforts to cool labour market. —

Jobs juggernaut shows no sign of easing

For those watching closely for a hint of softening in September’s labour force figures, it was another month of ‘déjà vu all over again’. Total employment increased by 64,100 jobs, with employment growth now averaging over 50,000 jobs per month for four consecutive months.

In September, almost all that growth was in full-time employment, in contrast to August which saw 48,500 part-time jobs added.

Evidence of strong ongoing labour demand in the latest figures will have analysts across the country pushing out expectations for when the Reserve Bank will start cutting interest rates.

The odds of a rate cut this year are rapidly vanishing. Employment increased in all jurisdictions save for a slight drop in the NT.

There was growth in employment for both men and women, helped by a 1.1 per cent surge in male full-time employment (63,600 jobs) and 1.0 per cent jump in female part-time employment (30,000 jobs).

As published in the September figures, the headline unemployment rate remained steady at 4.1 per cent. That misses some of the picture.

On release the August figure was 4.2 per cent. That has been revised down to 4.1 per cent in the latest estimates, reinforcing the underlying strength of the labour market. Further, the rate dropped almost a percentage point in September from that revised figure, but remained at a rounded-up 4.1 per cent.

The participation rate set a new record high of 67.2 per cent (up 0.1ppt), while the proportion of workers wanting to work more hours eased. The number of job vacancies advertised online recorded a second monthly increase in September (1.3%), adding to a surprise jump in August.

The September quarter CPI figure will be released at the end of this month, with the RBA Board meeting the following week.

Based on recent monthly figures, measures of underlying inflation are unlikely to fall into the RBA’s target range of 2-3 per cent per annum.

Even a better-than-expected figure is unlikely to prompt an interest rate cut in light of the robust labour market and future inflation already baked in as the effects of rebates for household electricity bills eventually unwind.

A public nuisance for monetary policy?

In June’s MLMU we noted that employment in the public sector was growing at over twice the rate of private sector employment, with potentially negative consequences for productivity and wage growth. Recently released data suggest this shift has become even more concerning.

The ABS provide more detailed breakdowns of employment for the middle month of each quarter. Data on employment by sector for August 2024 show employment in the public sector to have increased by 639,000 jobs over the past 12 months, a remarkable 33 per cent increase.

Private sector employment actually declined by 264,000 jobs (2.2%) for the year. Cautioning that these figures are not seasonally-adjusted, there was a remarkable 24 per cent jump in public sector employment in the latest quarter.

As explored this month, the expansion of public sector jobs was observed across all states and territories. The shift can partly be explained by strong growth in industries in which the public sector is prominent, such as health care and education, but there’s more to the story.

Public sector employment increased in every industry over the year. Further, where public sector employment increased most, private sector employment has fallen.

This pattern can be seen in Health care and social assistance, where public sector jobs increased by 173,000 in the past 12 months while private sector jobs fell by 69,000; Education and training (+148,000 public sector jobs, -36,000 private sector jobs); Public administration and safety (+98.000, -55,000); and other industries.

Competition for workers and skills drawn into the public sector can only add to wage and price pressures in the private sector.

RBA projections show they see the unemployment rate rising to 4.4 per cent to be consistent with inflation falling sustainably into the 2-3 per cent target range.

Save for some unknown change in how jobs are being coded by sector, the ABS data highlight how public sector expenditure is working against monetary policy and the RBA’s efforts to cool inflationary pressure stemming from the labour market.

With the value of output harder to measure in the non-market sector, and more challenging again in the case of services, growing public sector employment may also partially explain the economy’s mixed signals of strong employment growth and low unemployment juxtaposed by weak GDP growth and falling productivity on conventional measures.