Expectations of a rate cut from the RBA have been pushed back by today’s release of the February Labour Force data. The seasonally adjusted unemployment rate dropped by 0.4 per cent to 3.7 per cent, as many workers who were jobless in January, but had employment to move in to, have taken up those jobs.

There was a very large increase – 116,500 people employed over February in seasonally adjusted terms. However, on a trend basis, employment increased by 26,600 people and the unemployment rate remained steady, at 3.8 per cent. The unemployment rate in trend terms has now been steady for six months straight.

The unusually large drop in unemployment can be partially attributed to a higher than normal inflow of workers into employment in February this year. The ABS did point out that employment growth and population growth have been roughly the same since August 2023, which is why there has been little change in unemployment.

This data will be taken with caution by both the RBA and Federal Treasury, as both entities have been generally expecting a slowing labour market over the next six months. However, any continued strength in the labour force will likely push back the expectation of an interest rate cut to later in 2024, or even early 2025.

CreditorWatch’s Business Risk Index points to significantly slowing conditions in the small-to-medium enterprise sector, with the average value of invoices dropping on a trend basis over all of 2023 and in to early 2024. Trade payment defaults are at record highs, indicating that there are a higher-than-normal number of businesses with cash flow issues.