Gen Z the ‘canary in the coal mine’ on job losses

The RBA said in the minutes of the October 3 board meeting the red-hot jobs market had reached a turning point, but money markets still give a one-in-three chance of a cash rate rise at the November 7 meeting amid fears of ongoing inflationary pressures.

A surge in oil prices to $US93 a barrel after several months of effort by Saudi Arabia and Russia to cut supply, combined with fears that the Israeli-Hamas conflict could widen, add to speculation the RBA may need to raise the cash rate again in coming months.

The conflicting trends of a cooling labour market and stubbornly persistent inflation present a challenge for Ms Bullock as she weighs the need for further rate increases to get inflation back within the bank’s 2 per cent to 3 per cent target range by the end of 2025.

Mr Fabo said the increase in youth unemployment appeared cyclical, with young people bearing the brunt of a slowdown in hospitality industry demand.

“A lot of young people work in hospitality, and hospitality employment – notwithstanding what people say about spending – it’s been really weak.”

NAB economist Taylor Nugent said the increase in youth unemployment also stemmed from the surge in net overseas migration over the past year.

Industries such as hospitality that were more likely to employ international students and working holidaymakers have had a sharper fall in the number of job advertisements than other sectors of the economy.

“Youth unemployment remains low but has risen in recent months as many young people compete for similar jobs as most temporary visa holders,” Mr Nugent said.

Underemployment on the rise

The RBA also on Tuesday pointed to increasing underemployment as evidence the labour market was buckling under the pressure of high rates. Underemployment was 6.4 per cent in September, up from the low of 5.8 per cent reached in February 2023.

The increase in underemployment was partly a result of recent strength in part-time employment, since part-timers were more likely to report wanting more hours, said Gareth Aird, Commonwealth Bank’s head of Australian economics.

Full-time employment – a traditional barometer of strength in the jobs market – has fallen by 53,000 since June.

Despite evidence the jobs market was cooling, Mr Nugent said NAB still expected the RBA to lift rates on Melbourne Cup day.

While the jobs market had slowed, it was by less than the RBA’s most recent forecasts from August, he said. It was unlikely the jobless rate would rise fast enough to average 3.9 per cent in October-December, as the central bank projects.

“NAB continues to expect the RBA will lift rates in November following inflation data next week that we think will confirm less progress on disinflation than the RBA had been forecasting,” Mr Nugent said.

Analysts agree that the September quarter consumer price index report to be released on Wednesday will be pivotal in determining whether the RBA board raises the cash rate when it next meets.

NAB expects underlying inflation was 1.1 per cent in the three months ended September 30, compared with the RBA’s forecast of 0.9 per cent.