Australia’s unemployment rate has continued to edge higher, despite the creation of about 50,000, mostly full-time, jobs.
Bureau of Statistics figures put the unemployment rate at 4.1 per cent in June, up slightly from 4 per cent the previous month, an uptick most economists believe is insufficient to shift the dial at next month’s Reserve Bank meeting.
But the benign employment numbers will place greater emphasis on the inflation data due in a fortnight.
The bureau’s head of labour statistics, Bjorn Jarvis, said a slight increase in the proportion of Australians aged 15 and over in work or looking for it, was the main reason unemployment rose despite such strong job creation.
“The participation rate in June was only 0.1 percentage point lower than the historical high of 67.0 per cent in November 2023,” he noted.
“The employment-to-population ratio rose by 0.1 percentage point to 64.2 per cent, which was also close to its historical high of 64.4 per cent in November 2023.
“This, along with the continued high level of job vacancies, suggests the labour market remains relatively tight, despite the unemployment rate being above 4.0 per cent since April.”
Crucial data
Jobless numbers are critical in Reserve Bank interest rate decisions and money markets, which were anticipating the creation of only 20,000 new jobs, reacted to the unexpectedly strong growth by pushing market interest rates higher while the stock market edged lower.
Traders have now eliminated any chance of a rate cut this year and marginally lifted the betting of a rate hike at the next RBA meeting next month to 20 per cent, although some economists still believe a cut is possible by Christmas.
RBC Capital Markets chief economist Su-Lin Ong has maintained her view that rates will be kept on hold in August with the jobs data painting a picture of a still tight labour market that is loosening only gently.
“On its own, it does not tip the balance for the August meeting which is finely balanced in our view, with the RBA reluctant to move and likely only hiking if forced by second quarter inflation on July 31,” she said.
Her prediction is for modest rate cuts midway through next year.
Betashares chief economist David Bassanese agreed, arguing the jobs data, which continues to defy the doomsayers, was evidence of underlying strength in the economy.
“All up, today’s June employment report suggests the labour market remains relatively firm and so is no barrier to an August interest rate increase if the June quarter Consumer Price Index inflation report later this month is disappointingly high,” he said.
Creditor Watch economist Anneke Thompson said that while the jobs growth had been strong, it had broadly kept up with population growth since borders reopened in the aftermath of the pandemic but remains well below pre-COVID levels.
“Labour force conditions are still strong, though not overheating,” she said.
“Overall, this is positive news for the RBA, who are keen to maintain strong employment while getting inflation back into the target band – the ultimate threading of the needle.
“So far, they are successful on the employment side, but it remains to be seen if inflation can be pushed back into the band at the current monetary setting,” she said.
Bright spots
The ABS’s Mr Jarvis pointed out that, although the unemployment rate had risen half a percentage point from where it was a year ago, the jobless rate is still 1.1 percentage points lower than it was in March 2020, just before COVID lockdowns threw the economy into recession.
In other good news for workers, underemployment also fell 0.3 percentage points to 6.5 per cent, due to an increase in hours worked as most new jobs were full-time roles.
More encouraging was that youth unemployment ticked lower to 9.5 per cent from 9.7 per cent, the first decline in four months.
However, the ABS data also confirmed what most of us already knew anecdotally, which is that an unusually high number of workers were off sick last month as a wave of respiratory illnesses swept the nation.
“In June, we continued to see more people than usual working reduced hours because they were sick, similar to what we saw in May,” Mr Jarvis observed.
“Around 4.5 per cent of employed people in June could not work their usual hours because they were sick, compared to the pre-pandemic average for June of 3.6 per cent.”
To make up for being sick, fewer workers took winter holidays in June.
“However, we also saw less people taking annual leave in June 2024,” Mr Jarvis added.
“There were around 12.5 per cent of people working fewer hours because they were on leave, compared with the pre-pandemic average for June of 14.5 per cent. This contributed to the increase in hours worked this month.”
Posted , updated