By Ambar Warrick
Investing.com — Australia’s job market unexpectedly shrank in December as the participation rate fell from record highs, although employment conditions remained relatively tight amid increased openings and potential labor shortages.
The number of employed people in Australia fell by 14,600 to 13.8 million on a seasonally adjusted basis, missing expectations for a 22,500 increase, data from the Australian Bureau of Statistics showed on Thursday.
Still, the figure was 3.5% higher than that seen in December 2021, while the number of unemployed people shrank 16.9% from last year, indicating a strong recovery from a pandemic-era lull.
The country’s participation rate shrank to 66.6% from a record-high 66.8% in the prior month, while the unemployment rate remained steady at 3.5%, missing expectations for a fall to 3.4%.
The total number of hours worked during the month fell 0.5% from the prior month to 1.89 billion hours. But the figure was 3.2% higher than the same period last year.
Thursday’s reading comes after employment grew far more than expected in November, as an increased number of openings kept labor conditions tight. While unemployment remained steady, it was also near its lowest level in nearly 50 years.
Strength in the jobs market was one of the biggest supports to the Australian economy through 2022, with household spending – a major driver of growth – remaining steady on sustained employment conditions.
But given that wage growth largely lagged inflation through the year, the trend may shift in the coming months. Australian inflation bounced back to an over 30-year high in November, and is expected to have remained elevated in the fourth quarter of 2022.
This is likely to invite more interest rate hikes by the Reserve Bank, with strength in employment also giving the bank more economic headroom to keep hiking rates.