Unemployment rate inches up to 3.8pc in March as jobs market remains tight

Australia’s unemployment rate marginally increased in March despite widespread expectations of a gradual cooling this year, underscoring the tight labour market amid high population growth.

Some economists say the figures showed it was still too soon to be considering Reserve Bank interest rate cuts.

The number of unemployed people increased by 21,000 nationally in March, figures on Thursday from the Australian Bureau of Statistics show, putting the unemployment rate at 3.8 per cent — up from 3.7 per cent in February.

The unemployment rate increased in NSW, Victoria and Queensland by 0.2 percentage points over the month, and by 0.6 percentage points in SA, but fell in WA (0.2 ppt), the NT, Tasmania and the ACT by 1.2 percentage points.

The national rate has only been above 4 per cent for one month since early 2022.

But the monthly numbers have been volatile for some months, as the ABS reports changes to employment patterns affecting its seasonally adjusted measurements. On a smoothed, trend level, the unemployment rate has been at 3.9 per cent for five consecutive months.

“The labour market has weakened since 2022, but is holding up much better than expected.” AMP deputy chief economist Diana Mousina said.

The jobless numbers are a key consideration for the RBA in its determinations on official interest rates, which have been on hold at 4.35 per cent since November last year. The RBA expects the jobless rate to gradually increase this year as the economy cools.

The other component in its rates calls is inflation, for which the latest figures are released next Wednesday.

EY senior economist Paula Gadsby expects the RBA will keep rates on hold.

“Clearly, indebted households are belt tightening to meet cost-of-living pressures and higher interest rates,” she said. “But many businesses continue to do well, and State and Federal Government spending is also providing some stimulus.

“So far, the unemployment rate continues to move in line with the Reserve Bank’s forecast of 4.2 per cent by June 2024 . . . (but) this won’t sway the RBA’s current stance.

“If anything, it presents an upside risk to inflation, with a tight labour market likely to keep pressure on wages.”

HSBC chief economist Paul Bloxham said the market was only gradually loosening and the figures were more evidence that it is still far too soon for the RBA to be considering rate cuts”.

“There is still a non-zero risk that the cash rate may yet have to be lifted further — that is, the next cash rate move could be up, not down,” he said.

ANZ senior economist Blair Chapman maintained the bank’s expectation of an interest rate hold until November.

“The RBA was forecasting employment growth to slow to 2 per cent year-on-year and the unemployment rate to reach 4.2 per cent by the end of the June quarter this year,” he said.

“For that to be realised employment needs to fall slightly in the June quarter and the unemployment rate to increase faster than it has over recent months.”

Ms Mousina said it was “hard to see the RBA rushing towards cutting interest rates soon” given the labour market strength.

“We have been expecting the RBA to cut around mid-year, but the resilience of the labour market means a high risk that the first cut comes later in the second half of the year, even with our expectation that next week’s March quarter inflation data will show a further improvement in reducing the pace of inflation,” she said.