In a surprising turn of events, Australia's job market experienced a contraction in April, leading to a rise in the unemployment rate. Although economic activity cooled down slightly, the presence of numerous job vacancies indicated that the labor market was still thriving.
According to the Australian Bureau of Statistics (ABS), the total number of employed individuals in the country decreased by 4,300 in April, reaching a seasonally adjusted figure of 13.9 million. This decline was contrary to expectations of a 25,000-person increase and indicated a slowdown in job growth following a significant surge of 53,000 in March.
Consequently, the unemployment rate rose from 3.5% to 3.7% compared to the previous month. However, while the total number of hours worked increased in April, fewer people were employed due to the Easter holidays. The ABS explained that this decline in employment was partly offset by individuals working longer hours, suggesting that the labor shortage was being somewhat addressed.
This development marks a cooling period in Australia's job market after a post-COVID boom over the past year. It coincides with the country's interest rates reaching decade-high levels as the Reserve Bank raised rates to combat inflation.
Additionally, recent data revealed a slight deceleration in Australian wage growth during the first quarter of 2023.
The Reserve Bank of Australia (RBA) has warned that employment is expected to further cool down this year, given the persistently high rates or possible further increases. With weakness in the job market, the RBA has limited room to continue raising rates.
Consequently, the Australian dollar experienced a 0.4% decline on Thursday, reflecting the market's response to these developments.
However, as the RBA tightens its policies this year, it will closely monitor the labor market for further signs of cooling. Despite the increase in unemployment in April, it still remains near a 50-year low reached last year. The strong employment figures have been a rare positive aspect of the Australian economy amid high interest rates and elevated inflation.
