Unemployment: Jobless rate down in November despite weak economy

Australia’s jobless rate surprisingly dropped back to 3.9 per cent in November, despite the Reserve Bank’s concerns this week that the economy has been soft.

That’s down from 4.1 per cent in October, according to Australian Bureau of Statistics data released on Thursday.

About 36,000 people secured work in the month.

ABS head of labour statistics David Taylor chalked up the gains to a higher-than-usual number of unemployed people finding jobs.

The upcoming quarterly inflation figures — to be published in January — will be most significant in determining the RBA’s next move, but jobs figures will also be a factor.

That’s because the central bank wants to fight inflation without sparking widespread job losses, a key reason why Australian interest rates did not go up as much as other countries.

Hot employment also indicates a strong level of spending across the economy, which could put upwards pressure on prices. The RBA wants to rein that in.

“These tight labour market conditions make it tougher to achieve low and stable inflation,” EY chief economist Paula Gadsby said.

“The Australian labour market continues to operate at a level above full employment, and while productivity growth remains weak, the Reserve Bank will remain alert.”

Betashares chief economist David Bassanese said the “blockbuster” report would likely push back an interest rate cut from February until later in the year, tipping May.

But he said low unemployment should not stop the RBA moving if inflation keeps falling.

Also thinking the new data would give the Reserve Bank reason to be patient was VanEck head of capital markets Russel Chesler.

He said a spike in the unemployment rate would have been a red flag for the central bank and strengthen the case for an earlier cut.

“The RBA is expecting the labour market to loosen quite a bit more as we hit the home stretch of the current tightening cycle, with the quarterly unemployment rate increasing. . . to 4.5 per cent and remaining there until the end of 2026,” Mr Chesler said.

The latest figures come just two days after the Reserve Bank held official interest rates at 4.35 per cent, but signalled a cut would be considered next year.

Governor Michele Bullock said the board had noticed recent growth data was soft. The central bank also dropped its long-repeated warning that it might move either way on interest rates.

But fighting inflation remained top priority.

“We’re not saying that we’ve won the battle against inflation yet,” Ms Bullock said.

“But we’re saying we’ve got a little bit more confidence that things are evolving as (predicted) in our forecasts.”

Her words sparked optimism on Tuesday and markets shifted to price in a February cut as more likely than not.