Interest rates: Australian unemployment rate sparks grim prediction of May mortgage payment spike

A red-hot job market is expected to put pressure on the Reserve Bank to raise interest rates at its next board meeting.

The unemployment rate held steady at the near-50-year low of 3.5 percent in March after adding 53,000 jobs to the market.

Economists had widely suggested that the official unemployment rate would rise to 3.6 percent and that some 20,000 jobs would be added, indicating a cooling of the labor market.

BIS Oxford Economics head of macroeconomic forecasting Sean Langcake said the data supported expectations that the RBA would raise rates again in May.

“There are very few signs of weakness in this data and little to suggest that the labor market is slackening in any meaningful way,” he said.

“This confirms our expectation that the consumer price index printout will be strong in the first quarter.”

The central bank paused its aggressive tightening cycle in April after raising cash rates from 0.1 percent to 3.6 percent in 11 months in a bid to tackle skyrocketing inflation.

New quarterly inflation data will be released later this month. In the December quarter it rose to 7.8 percent over the year, the highest since the 1990s.

The RBA forecasts that inflation will fall to 4.75 percent in 2023 and fall to about 3 percent by mid-2025.

AMP chief economist Shane Oliver said inflation data will be key as declining job openings and the return of immigration point to “softer” job numbers ahead.

“It makes more sense to stay on hold,” he said.

Meanwhile, ANZ analysts “don’t think” this month’s numbers will be enough for a cash rate hike in May.

“Given the RBA’s rationale for pausing in April: to assess the impact of the 350 bps cumulative increases to date given the long delays in monetary policy,” the bank said.

Economists indicated that the unemployment rate would rise to 3.6 percent and some 20,000 jobs would be introduced to cool the labor market (stock image)

The low unemployment rate in nearly half a century suggested the labor market remained tight, said Lauren Ford, chief of labor statistics at the ABS.

“With an increase in employment of about 53,000 people and a decrease in the number of unemployed by 1,600 people, the unemployment rate remained at its lowest point in 50 years, at 3.5 percent,” she said.

‘In line with the increase in employment, the employment/population ratio increased by 0.1 percentage point to 64.4 percent, while the participation rate remained at 66.7 percent.

“Both indicators were close to their all-time highs in November 2022, reflecting a tight labor market and explaining why employers are struggling to fill the large number of vacancies.”

The unemployment rate, which measures those who have a job but can’t get the extra hours they would like, rose from 5.8 percent in February to 6.2 percent.

“The unemployment rate remains low in historical terms, 2.5 percentage points lower than before the pandemic. This continues to be supported by consistently faster growth in hours worked,” said Ford.

The low unemployment numbers support expectations that the RBA would raise rates again in May

In the past two months, female employment increased by 81,000, pushing the female employment rate to a record 62.5 percent.

Treasurer Jim Chalmers said it was ‘remarkable’ that Australian had an unemployment rate with a three in front.

“With all these challenges that we have in our economy and in the global economy in particular, that’s been a pretty remarkable result,” he told Nine ahead of its release.

“The first six months of the Albanian government was, I think, the fastest job growth for a new government in a six-month period.

“That’s one of the things we’re going for. Even though unemployment is shifting part of a percentage point in either direction, it’s still true that that’s been a source of significant strength.”