Jobless rate remains steady in March, what to expect from interest rates?

Highlights

• The unemployment rate remained at a 14-year low of 4% in March 2022.
• The jobless rate for women fell faster than that for men, reflecting a continuing trend from last month.
• Given the labour market’s strength, the RBA could conduct a rate hike as early as June 2022.

The recent labour force update from the Australian Bureau of Statistics (ABS) has once again showcased the strength of the labour market despite ongoing global challenges. As per the latest data, the unemployment rate remained at a 14-year low level of 4% in March 2022. This was the second consecutive month when the unemployment rate remained at the 4% threshold level.

The ABS release came a few days after the central bank predicted that the unemployment rate is slated to decline below 4% by 2023. If attained, this would be a historic feat for the country, as the jobless rate below 4% was last seen during the 1970s.

The unemployment rate for March has been calculated in rounded terms. It does not represent the fact that there has been an improvement in employment over the last month. Employment increased by 18,000 people in March, while unemployment fell by 12,000 people.

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Unemployment rate declined faster for women

The unemployment rate for women fell faster than that for men. This was a continuing trend from last month. The unemployment rate for women fell from 3.8% to 3.7%, the lowest since May 1974. However, the unemployment rate for men remained at 4.2%, the second-lowest in the series since November 2008.

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However, the results were contrasting for the participation rate, which remained at 66.4% in March. The participation rate increased by 0.1 pts to 70.8% for men and decreased by 0.2 pts to 62.2% for women.

Overall, the participation rate was higher than March 2020 by 0.6pts, possibly due to the virus-related fears subsiding to a great degree. In early January, the participation rate had declined due to self-imposing restrictions by individuals.  

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Youth employment rising in Australia

The rise in employment during March 2022 marked the fifth consecutive month. Compared to the pre-Delta period of June 2021, there were an additional 220,000 people employed during the month. However, the employment for those aged between 15 and 24 years increased by 36,000 people in March 2022.

Experts suggest that young individuals were gravely affected by the Delta-variant as they could not join the workforce. However, over the past one year, youth employment has increased steadily. The youth employment-to-population ratio was the highest in March since August 2008.

Why hours worked plummeted in March?

The hours worked fell 0.6% in March 2022, primarily affected by floods in New South Wales and Queensland. A higher than the usual number of people reported working lesser number of hours due to bad weather conditions during March.

Apart from these individuals, many others decided to take a leave from work due to illness, showing some of the remaining impacts of the Omicron variant. The fall in hours worked is preceded by a fall in payroll jobs and wages over the same period. However, all these parameters can show larger short-term changes than that seen in overall employment because some employees might be absent from work without losing their jobs.

How soon will the RBA raise interest rates?

The market expectations for an interest rate hike are higher now than they have ever been. The Reserve Bank of Australia (RBA) Governor Philip Lowe dropped the word “patient” from his latest policy meet speech. This seemingly minute detail has fuelled speculations of a sooner rate hike than past expectations.

However, a rate hike might not be favourable as soon as the next month as the RBA might first want to examine wages data, which is due in May. Based on these factors, many experts anticipate a rate hike in June. Though an official confirmation is awaited, solid labour market results have further bolstered the market expectations of an early rate hike.

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