Australia’s unemployment rate remained steady at 4.1 per cent in February, as labour force participation declined.
According to the Australian Bureau of Statistics (ABS), 52,800 jobs were lost from the economy, well below forecasts of a 30,000 increase in employment.
The drop in employment came as fewer people were in work or looking for a job, with the participation rate falling to 66.8 per cent, from a record high of 67.3 per cent in January.
The ABS attributed part of the fall in employment to fewer older workers returning to work in February, with employment among older age groups lower than in the same month in 2024.
“This follows higher levels of employment in these age groups in recent years, particularly in 2024, alongside growth in the employment-to-population ratio over the last few years,” ABS head of labour statistics Bjorn Jarvis said.
“In contrast, we continue to see growth in employment for people aged between 15 and 54 over the year.”
In January, the unemployment rate edged higher to 4.1 per cent, but the rate of workforce participation hit a new high and the number of jobs added significantly beat forecasts.
“The participation rate is still relatively high, having reached a historical high last month, and is 0.1 percentage points higher than this time last year,” Mr Jarvis said.
The Reserve Bank’s latest forecasts, released last month, are for the unemployment rate to average 4.2 per cent by mid-year, and remain around that level over the next few years.
Seasonal return to work affecting figures
January’s jobs data was impacted by Australians waiting to return to work or start new roles after the summer break and economists have observed seasonal effects still playing out in February.
“We wouldn’t be surprised if the sharp fall in employment last month is revised to a smaller one over the coming months,” Capital Economics head of Asia-Pacific Marcel Thieliant wrote.
Betashares chief economist David Bassanese said the “apparent steep fall in employment during February needs to be taken with a grain of salt”, pointing to “turn-of-the-year seasonal adjustment problems” since the pandemic.
The ABS said there were higher levels of retirement in Australia in recent month, and that it would release more detailed data on the trend next week.
Unemployment rate
Seasonally adjusted
Drop unlikely to ‘derail jobs boom’
The Australian dollar posted a modest decline following the release of the figures.
The RBA board will deliver its next interest rate decision on April 1 and the tight labour market has been on their radar, but economists do not expect this latest data to have a significant impact on their decision.
Mr Thieliant said it provided “no reason for the RBA to panic”, given the unemployment rate remained steady despite the shock decline in employment.
“Given that economic activity is now rebounding, we doubt that the labour market will loosen much further,” he said.
“Accordingly, we still think that the [RBA] will only deliver a very shallow loosening cycle and have pencilled in just two more 25bp rate cuts.”
Callam Pickering, an economist at jobs site Indeed, noted it was the biggest fall in employment since December 2023 but described the jobs market as remaining “healthy”.
“That earlier decline didn’t derail Australia’s jobs boom and I suspect that’ll be true of the February decline as well,” he said.
“The Reserve Bank is unlikely to be too concerned… Certainly a decline in employment is undesirable, but the labour market remains incredibly tight.
“Another weaker outcome in March, however, would certainly give them a lot to think about.”
Mr Pickering forecast another interest rate cut in May or July.
ANZ Research had earlier forecast an August cut and maintained that call after Thursday’s release.
“We don’t think this print in isolation will have a material impact on the RBA’s monetary policy decisions moving forward,” economist Aaron Luk and head of Australian Economics Adam Boyton wrote in a note.
“Labour market fundamentals remain solid, with an overall robust trend in employment growth, a low unemployment rate and an elevated level of job advertisements.”
The rate of underemployment, which measures those available to work and wanting more hours, decreased slightly to 5.9 per cent, and was 2.8 percentage points lower than March 2020.
