Further declines in Australia’s unemployment rate are ‘more likely than not’

(Sindre Lundvold / Barcroft Media / Getty Images)
  • ANZ job ads index rebounded modestly in October after two straight months of falls.
  • ANZ’s David Plank said Australia’s jobs market has outperformed the signals from the job ads indicator in recent months.
  • After the unemployment rate unexpectedly fell to a 6 ½ year low last month, Plank said further falls are now ‘more likely than not’.

ANZ’s Job Ads index snapped a two-month losing streak to post a modest gain in October.

In seasonally adjusted terms, the number of Australian job ads rose by 0.2%, offsetting falls of 0.7% in August and September.


In trend terms though, jobs ads fell for the fifth straight month and posted the weakest annual growth since April 2015.

Despite the modest gain, it was a “pleasing” turnaround, said ANZ economist David Plank.

Last month, Plank highlighted that in an environment of falling house prices, a strong labour market was “critical” to Australia’s economic growth prospects.

And this post from Business Insider’s David Scutt last week reinforced how important jobs growth has become to the RBA in assessing the outlook for interest rates.

In that context, leading indicators such as the job ads index and job vacancy data from the ABS are worth monitoring.

Plank said the slowdown in job ads was broadly consistent with a softer jobs market this year, after torrid growth in 2017.

But he noted that in recent months, “employment growth has outperformed the signal from job ads”.

“The unemployment rate has also fallen more sharply than ANZ Job Ads would imply.”

Last month, Australia’s unemployment rate fell to 5% — the lowest level since April 2012.

The fall didn’t prompt a sharp move on markets, partly due to some scepticism about the statistical veracity of the result.

But it ran ahead of the RBA’s most recent forecasts for the unemployment rate to hold at 5.5% by year-end. And Plank thinks there could be more falls to come.

The bank’s aggregated Labour Market Indicator “suggests that a further decline in the unemployment rate is more likely than not”.

Australia will get its next update on the labour market with two key releases from the ABS in the middle of this month.

Quarterly wage price data on Wednesday, November 14 will be followed by the latest monthly jobs print the following day, Nov 15.