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The 4.1 per cent rise was driven by more people looking for work and shows the labour market is losing momentum, experts say.
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Jobless rate jumps, giving RBA breathing room after budget
17 May 2024
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A jump in the unemployment rate shows the labour market is losing steam, allowing the RBA to adopt a “wait and watch” approach to the federal budget’s new cost-of-living measures, economists say.
Labour force data released on Thursday from the ABS showed the seasonally adjusted unemployment rate rose to 4.1 per cent in April, up from 3.9 per cent.
The 30,000 rise in unemployed people came despite a larger-than-expected rise in jobs of 38,500, the ABS said, suggesting more people without jobs were available and looking for work.
RSM economist Devika Shivadekar said the rise in the unemployment rate indicated a shift in the labour market, “moving ahead on the loosening path” and giving the RBA sufficient reason to stay on hold for now.
“Conversations with our clients have highlighted that skill mismatch remains the biggest issue for businesses when it comes to hiring, likely contributing to the underlying tightness,” she said.
“This suggests that while finding employees for specialised roles still remains challenging, the gig economy labour market may have loosened considerably following increased population growth, offsetting tightness in the overall jobs market.”
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BDO economics partner Anders Magnusson said wages growth data that showed a second consecutive fall in the March quarter was another indicator of the labour market losing steam.
“Both the Treasury and the RBA expect the labour market to lose momentum over the next year, but for unemployment to remain below pre-Covid levels,” he said.
“Today’s unemployment figures, as well as the wage growth data released yesterday, validate this prediction for now.”
It would allow the RBA to monitor the inflationary impact of the government’s “cost-of-living” budget released on Tuesday without the pressure of a hike.
“If the RBA believes that this budget will stoke inflation, it will probably adopt a ‘wait and watch approach’ and allow inflationary pressures from cost-of-living measures to run their course. I think this case is more likely and we should not expect a cash rate cut before next year.”
AMP economist Diana Mousina said most forward leading indicators pointed to slower job gains in the coming year and predicted the unemployment rate gradually rising to 4.5 per cent at the end of 2024, earlier than the RBA forecast which put the peak of 4.4 per cent around mid-2025.
“An interest rate hike should not even be on the agenda of the next RBA board meeting in June,” she said.
“Our base case is that the RBA will need to start cutting interest rates around the end of the year because we see inflation slowing further from here alongside a weaker growth backdrop.”
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