Unemployment rate falls but we’re still ‘far from out of the woods’

The latest data from the Australian Bureau of Statistics (ABS) revealed that the unemployment rate for November dropped 0.2 percentage points to 3.9 per cent.

November reportedly saw an influx of unemployed people take up work, spurring results.

“With employment rising by 36,000 people and the number of unemployed decreasing by 27,000 people, the unemployment rate fell to 3.9 per cent,” ABS head of labour statistics David Taylor said.

“In November, we saw a higher-than-usual number of people moving into employment who were unemployed and waiting to start work in October. This contributed to the rise in employment and fall in unemployment.”

The drop in unemployment was pushed along by a 0.2 per cent growth in employment over the month, reaching a total of 14,544,200 people. The ABS said that since mid-2024, the average monthly rise has been 0.3 per cent, in line with population growth.

Meanwhile, the employment to population ratio reached 64.4 per cent, equal to the level a year ago and 2.2 percentage points above the pre-pandemic level. Underemployment stayed firm at 6.2 per cent while monthly hours work increased to 1.70 million.

Taylor continued: “The participation rate fell by 0.1 percentage point to 67.0 per cent in November, from the historic high of 67.1 per cent in September. Despite the fall, the participation rate was the same as a year ago, and 1.5 percentage points higher than March 2020.

“The recent growth in population has boosted the labour supply as employment has kept up with population growth.”

While the drop is a promising sign for the economy, Employment Hero’s CEO and chief economist, Ben Thompson, has urged caution as we’re “far from out of the woods”.

“While the ABS unemployment rate finally declines, Employment Hero’s data reveals nuanced challenges in Australia’s job market. Casual workers continue to bear the brunt of economic uncertainty, with working hours down 13.1 per cent year-on-year despite recent signs of recovery.

“The bright side is that retail and hospitality emerged as surprise performers, posting a 2.1 per cent job growth in November – the sector’s first positive momentum since late last year. Wage growth has hit 6 per cent annually, boosted by in-demand roles like truck drivers (up 14.9 per cent) and finance professionals (up 10 per cent),” Thompson said.

“However, businesses remain cautious. Wage pressures and economic headwinds are keeping workforce expansion tentative, signalling a challenging road ahead for Australian workers and small businesses as we enter 2025. A telltale sign is the substantial increase in hours worked by property valuers, up 8.3 per cent MoM and 22.3 per cent YoY, pointing to mortgage stress or anticipation of rate cuts after yet another RBA pause. While the job market shows signs of resilience, it’s far from out of the woods,” he added.

What this means for the rate call

Callam Pickering, APAC senior economist at Indeed, believes the data isn’t likely to influence the RBA’s cash rate stance as underlying inflation is still above target.

“We’ve had a huge couple of weeks for economic data. The latest GDP figures suggest that economic activity is much weaker than expected, forcing the RBA to downgrade its near-term growth outlook. And now we have a set of labour market figures so strong that it, too, may force the RBA to revise its unemployment rate outlook,” he said.

“The ongoing strength in the Australian job market means that the RBA can fully commit to achieving their inflation target without needing to worry about the job market unravelling. Forward-looking indicators of labour demand suggest that the unemployment rate is unlikely to rise materially in the near-term.

“Our view is that the RBA is unlikely to cut rates until they see sufficient progress with regards to service sector inflation and a considerable improvement in productivity growth. Not enough progress has been made on that front for the RBA to be confident in their ability to, a) return to their 2–3 per cent inflation target, and more importantly, b) stay there.”

Pickering has penned May as the month we can expect a cut: “Consequently, holding rates high and keeping them steady, at least for now, appears to be the most reasonable setting for monetary policy. We do not think a rate cut will happen early next year, with May probably the earliest households can reasonably expect rate relief.”

[Related: Labour market remains tight and resilient]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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