April Labour Force Preview
It is still too early to detect any material shifts in the labour market stemming from the Middle East conflict or recent interest rate rises. The April Labour Force Survey (LFS) could still deliver a surprise of its own though, due to the timing of the survey completely overlapping the Easter holidays – something that has caused unexpected results in the past.
- The March Labour Force Survey (LFS) showed that the overall labour market was in decent shape before the impacts from the Middle East conflict or recent interest rate rises. Employment growth was regaining momentum after hitting a trough earlier in the year, and the unemployment rate held steady at 4.3%.
- The focus has now shifted to how the labour market will respond to the new backdrop of high inflation, higher interest rates and slower growth. April is still too soon to detect any significant changes, but data on hours worked and industry breakdowns will be closely watched for early signs.
- We have pencilled in only a modest lift in employment of +10k. With the participation rate holding steady at 66.8%, the unemployment rate should also remain at 4.3%. Our forecast for employment captures some downside risk of a ‘seasonal abnormality’ – the complete overlap of the April LFS with the Easter holidays could over-emphasise seasonal weakness.
- The ABS are introducing some changes to the design, content and systems surrounding the collection of the LFS, as part of Bureau’s efforts to modernise the survey. Over the next five months, the LFS will be in a “transition period” (this is why the April survey release has been pushed back by a week). This will not have an impact on the headline statistics that inform our view of key trends and assessing the degree of tightness in the labour market.
Recap of March LFS
The March LFS was the first official piece of ‘hard’ economic data we received since the onset of the Middle East conflict. It was too early to expect flow-on effects from the Middle East shock or from recent interest rate rises to be appearing in labour market measures, however. Instead, the data provided us with a picture of the starting point for the labour market before these forces impact.
The key message was that the labour market was in decent shape. That said, the data had challenged the RBA’s earlier assessment that “the labour market has tightened a little recently”. The fall in the unemployment rate to 4.1% around the turn of the year proved temporary, as it lifted back to 4.3% in February and held at that level in March. While the RBA still views the labour market as “somewhat tight”, it did slightly tweak its language in that there is no longer a mention of the labour market having “tightened a little”, as we suggested.
Encouragingly, employment was also starting to gather momentum after recently hitting a trough, the increase of +17.9k in March lifting the annual growth pace up to 1.5%yr on a three-month average basis. This follows on from last year’s recovery in domestic demand, which was starting to see job gains broaden across consumer- and business-facing industries.
The focus has shifted
While the March LFS painted a decent picture of the starting point for the labour market, the outlook has become gloomier as the Middle East conflict has unfolded. There is growing evidence of fuel costs being passed-through across the economy, leading to higher prices and, ultimately, a lift in underlying inflation near-term. To ensure this does not get embedded into expectations and guard against upside risks, the RBA will need to respond with further policy tightening – we believe another two 25bp rate hikes in August and September is most likely.
High inflation and higher interest rates will weigh on economic growth, and this will eventually feed into a weaker labour market with a bit of a lag. We are not expecting anything as severe or generalised as a recession, but the return of ‘sluggish’ growth means employers will likely put new hiring decisions on hold and opt to reduce the number of hours offered to staff where possible. Experiences will vary across industries – those more exposed to the fuel shock likely to show weakness more quickly, such as manufacturing, construction, transport/logistics and travel/tourism.
What are we thinking for April?
For April, we have pencilled in only a modest lift in employment of +10k. With the participation rate holding steady at 66.8%, the unemployment rate should also remain at 4.3%.
Our forecast for employment is on the weaker side as it also captures some downside risk associated with the timing of the survey and Easter holidays (see below). Additionally, some partial indicators in the lead-up to the April LFS have been on the weaker side – ANZ-Indeed job ads fell 0.8% in April and the employment sub-index from the NAB business survey dropped 5pts to its weakest level in nearly two years. These should be taken with a grain of salt though, given these data rarely line up with the exact month-to-month moves in the LFS.
We will be keeping a close eye on the hours worked data and the industry-level data for any early signs of stress, although the main message is that it is still probably too early to detect any material shifts in the labour market at this stage. And as far as the RBA is concerned, the most immediate and pressing concern is inflation, so this round of labour market data (given there is no major surprise) is unlikely to shift the policy calculus materially.
Any seasonal quirks to bear in mind?
One point worth noting with the April LFS is that there have occasionally been surprising results depending on how much of the Easter holidays (i.e. Good Friday and Easter Monday) is captured by the survey. Given the variable timing of Easter each year – ranging between late March and late April – the April survey may either entirely overlap, partially overlap, or completely miss the holidays in any given year.
This is important because seasonal patterns are distinct around holiday periods – for example, hours worked might be weaker because more people decide to take leave, or employment may decline as some people decide to take a break before switching jobs. Given Easter holidays change timing each year, this can present a challenge for seasonal adjustment. In any case, seasonal adjustment allows us to strip out what the ‘normal’ April looks like. This gives us a sense of whether this year’s April month is stronger or weaker than normal. But if there is a much wider range of outcomes around this ‘normal’ (because of the varied timing of Easter), then the data could end up being over- or under-adjusted.
The ‘rarest’ case we see is the April LFS completely overlapping the Easter holidays, capturing both Good Friday and Easter Monday. This has only happened a handful of times in recent history: in 2006, 2012, 2015 and 2023. In these years, the clearest pattern that has emerged is within the employment data: larger falls in April, followed by a rebound in May. Other outcomes have been a bit more mixed, but we have generally seen a temporary lift in unemployment and tick-down in labour force participation in some of these years too.
This year, the April LFS is in the field from 29 March to 11 April, meaning this will be another year where there is a complete overlap of the April survey with Good Friday (3 April) and Easter Monday (6 April). Therefore, we need to be aware of the risk that employment could be a bit softer than expected, or we get some surprising results around unemployment or participation.
We have incorporated some of this downside risk into our estimate, but of course, this abnormal seasonality doesn’t happen in isolation – the broader trends forming in the labour market and other bits of noise play significant roles too.
Upcoming changes to the LFS
The ABS are introducing some changes to the design, content and systems surrounding the collection of the LFS, as part of their work to modernise the survey. Over the next five months, the LFS will be in a “transition period”. This will not have an impact on the headline statistics that inform our view of key trends and assessing the degree of tightness in the labour market.
However, some of the supplementary data products used for more specific insights will be impacted. Some will be permanently ceased, some will be moved to supplementary surveys that are conducted less frequently, while some will be temporarily on hold. The complete list of changes to tables can be found here.
During this transition period, the release of the survey will be pushed back by a week. In doing so, the ABS will be consolidating the data into one single release item, rather than splitting it up into a “headline” and “detailed” release over two weeks. Later this year, the ABS plans to publish another article confirming the final survey outputs after the transition is complete, from the September 2026 survey onwards.
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