Jobs market troubles putting pressure on RBA rate calls

There are troubling signs that the jobs market is deteriorating more quickly than anticipated, increasing the chance the Reserve Bank will be forced to decide between a rise in unemployment or higher inflation.

The keenly watched ANZ-Indeed measure of job ads tumbled by 3.3 per cent in September, its single largest monthly drop since February last year. September was the third consecutive monthly fall in the measure and the sixth monthly drop through 2025.

Ads are down to their lowest level since 2021 during the pandemic period. The drop in ads is a little stronger than the fall in job vacancies, as measured by the Australian Bureau of Statistics, but both are pointing to ongoing softness across the jobs market.

ANZ economist Aaron Luk said on a per-unemployed-person basis, both job ads and job vacancies are at their lowest levels since early 2021.

“Overall, we find that the labour market has eased slightly in recent months, versus the RBA’s view that conditions have been ‘steady’ and ‘stable’ in their September post-meeting statement,” he said.

The Reserve Bank has a dual mandate, requiring it to keep inflation within its 2-3 per cent target band and to help deliver full employment.

The most recent monthly inflation report, covering September, showed price pressures picking up in some parts of the economy, while its measure of underlying inflation eased but not as much as hoped.

Financial markets now put the chance of an interest rate cut at the Reserve Bank’s early November meeting at 50-50.

Senior economist Callam Pickering said the jobs market data suggested the Reserve should cut rates next month.

“Based on recent soft labour market data, the RBA needs to cut rates further to provide sufficient support to households and businesses, while ensuring that the unemployment rate remains low and we avoid recession,” he said.

“Cutting rates again isn’t without its risks, but the risks of keeping them too high appear more damaging right now.”

The figures were released on the same day the Westpac-Melbourne Institute’s measure of consumer confidence fell by 3.5 per cent in October to be down by 6.5 per cent over the past two months.

Westpac’s head of macro-forecasting, Matthew Hassan, said the sharp fall in consumer optimism was largely due to the concerns about inflation and what it may mean for the future direction of interest rates.

Despite the concerns over rates, the same survey showed consumers increasingly bullish about house prices. Expectations that property prices will continue to rise hit a 15-year high in October with more than 75 per cent of those surveyed believing values will lift.

AMP economist My Bui said while consumer confidence had lifted over the past year, many consumers were still downbeat.

“Sentiment has been negative for more than three-and-a-half years and consumers are likely still price conscious in the current climate, which underpins our outlook that growth remains below long-term trend and underlying inflation stays around the 2.5 per cent target,” she said.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.