Surprise unemployment rate jump brings November rate cut into play

ANALYSIS

A shock jump in unemployment suggests that all that job cutting the major banks have been doing might now be filtering through to the economy.

And the worst part for the banks? Their lay-offs may be paving the way to a rate cut.

September data released by the Australian Bureau of Statistics (ABS) showed the nation’s seasonally adjusted unemployment rate rose a whopping 0.2 per cent from the revised August figure to now sit at 4.5 per cent.

That’s the highest level it has been since the Covid lockdown aftermath, according to Sean Crick, ABS head of labour statistics.

“This is the highest seasonally adjusted unemployment rate recorded since November 2021,” Crick said.

“There were 34,000 more unemployed people in September. The number of employed people also grew, up 15,000 in the same period.”

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Recent data from ANZ and employment group Indeed also found the number of job ads fell by 0.3 per cent in September from August, the steepest decline since February 2024. Ads in September were also down 4.3 per cent on the same month last year.

“Job ads have now declined for three consecutive months after holding broadly steady for over a year, suggesting labour market conditions are beginning to ease,” said ANZ economist Aaron Luk.

Unemployment is a key factor that the RBA monitors closely when considering rate movements.

And while the August figure of 4.2 per cent (revised to 4.3 per cent) was not enough to spark the central bank into action, there was a lot going on at the time. Especially in the banking sector.

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September saw a raft of job cuts announced by lenders. First, it was ANZ with about 3500 roles to be cut, representing an estimated 14 per cent reduction to its workforce, according to the Financial Services Union. On top of that, another 1000 contractor roles would be affected.

And because banks like to follow each other’s leads, NAB announced plans to cut 410 jobs, while a Bendigo Bank restructure would affect 637 staff, Bank of Qld is cutting 200 roles and moving half its call centre operations to India. Meanwhile, Westpac is reportedly still considering about 1500 redundancies.

Australia’s workforce is at about 14 million people, so 14,000 job losses can move the unemployment figures. In September, banks got us nearly halfway there.

On top of this, BHP Mitsubishi Alliance announced 750 job cuts in Qld, Telstra is planning to add 550 role reductions to its already 2800 cuts this year and Australian biotech company CSL has announced 12,000 global lay-offs, a significant number of which could be in Australia.

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If more banks and other major companies follow suit, they might find they shift the unemployment dial far enough to prompt another rate cut.

RBA Governor Michele Bullock has repeatedly emphasised the importance of unemployment figures in shaping cash rate decisions, and while the central bank had forecast a 4.3 per cent unemployment rate through to 2027, a strong increase in that figure would lead to pressure for further, accelerated rate cuts.

Bullock recently told the senate economics committee that she believed the unemployment rate would increase over the rest of this year.

“Employment is growing. It’s just not growing as quickly as the labour force,” she said.

The latest numbers prompted a statement from Treasurer Jim Chalmers, who noted that unemployment remained low and participation rates were high.

“With all the uncertainty coming at us from around the world, new jobs were still created, unemployment is still very low by historical standards, and participation is high, and that combination is one of our best defences against the difficult circumstances we confront,” he said.

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