Recent data on employment and unemployment have been soft, but hours worked show a more resilient picture, Westpac said in a note on Thursday.
The growth in hours worked jumped to 2.5% on an annual basis, while employment growth is running at 1.5%, the bank noted.
Typically, hours worked move before employment, both when demand for labor is strengthening or weakening. Households seek to offset weaker real incomes by increasing hours, participation, or taking on secondary employment.
While the current inflation episode is expected to be less severe than 2022-24, in level terms, real per capita household disposable income is still noticeably below the pre-pandemic trend.
At the current early stage of the inflation pulse, workers are seeking more hours to buffer against cost-of-living pressures, and employers may have some capacity to offer those hours. But the bank cautioned that employers may start to pull back on average hours, as the shock continues to materialize and consumer demand weakens.