Overall, the February survey presented another murky read on the state of the labour market. Shifting seasonal dynamics continue to have a significant influence, making it difficult to gain a clear read on underlying conditions in the labour market.

On balance, the latest update does not materially shift our view. As the slowdown in activity perseveres and broadens across the domestic economy, conditions in the labour market are softening. Demand for labour is moderating and is not expected to keep up with growth in labour supply, seeing the unemployment rate over the course of this year. Employers that are seeking to adjust labour usage are predominately doing so by reducing average hours worked. At this stage, it looks as though there is further scope for this to run into mid-year. Growth in employment will continue to slow within this context, but a transition into material economy-wide declines in employment seems unlikely at this stage.

The RBA continues to assess labour market conditions as “tighter than is consistent with sustained full employment and inflation at target”. More updates on the state of the labour market will be necessary before any material adjustment to that assessment occurs, especially given the extreme volatility within these figures over recent months.

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Ryan Wells

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