Unemployment Rate Spikes: Is AI to Blame?

Added: 2026-05-26

[00:00:00]The latest data from the ABS showed that the seasonally adjusted unemployment rate rose to 4.5% in April as the number of employed people fell by 19,000 while the number of unemployed people rose by 33,000.

[00:00:15]Number of unemployed people looking for full-time work increased by 11,000 and unemployed people looking for part-time work increased by 22,000.

[00:00:25]Actually, total number of people employed fell for the first time this year driven by 56,400 fewer people aged 15 to 24 years old working in April. Youth unemployment is now at 11.1% that's the highest since October 2021.

[00:00:46]IFM chief economist Alex Joiner noted the sharp rise in youth unemployment has often been a precursor to economic weakness, but they also may be bearing the brunt of AI-induced changes in hiring patterns.

[00:01:02]Now, this overall result was a surprise given that economists had expected employment to grow by about 15,000 and it may be evidence that the combined effect of the three consecutive rate rises and the energy shock created by the war in Iran is now arriving sooner than expected.

[00:01:21]This is as Morgan Stanley's equity strategist Chris Nikols said in the week, the slowdown that we have to have if we want to tame inflation, but it doesn't make it any more fun particularly for investors with the exposure to domestic economy or I would add for those out of work.

[00:01:41]This is now the highest level of unemployment since November 2021 suggesting the labor market is cooling faster than anticipated and it prompted traders to shade back their expectations for rate rises slightly with a June rise now less likely.

[00:02:00]The central bank next meets on June the 15th and 16th.

[00:02:05]The markets reacted with a two-year government bond yield, which reflects interest rate expectations, down to 4.618%.

[00:02:13]The 10-year bond dropped to 4.957% and the 30-year was last at 5.447% and the Aussie was at 71.34 US cents and 53.08 UK pence.

[00:02:28]And the ASX was up on the day, mirroring moves in the markets.

[00:02:33]The truth is we can make little of these employment numbers though the next few months of inflation data are going to remain elevated because oil prices haven't come down yet as the Middle East conflict continues and the state government budgets really so far contain more spending, which will add to inflationary pressures, so upward interest rates possibly and probably more unemployment.

[00:02:57]And that is not going to be pretty.