Australia’s unemployment rate ticked higher last month, even as employers added about three times as many jobs as expected. The job gains will probably discourage the Reserve Bank from cutting its key interest rate in the near term.
The jobless rate in July rose to 4.2%, seasonally adjusted, the Australian Bureau of Statistics reported on Thursday. Economists had expected the rate to remain in line with June’s 4.1% level for June.
The economy added 58,200 jobs last month, with 60,500 full-time roles added and 2,300 part-time jobs shed. Economists had tipped employers would have added a net 20,000 positions.
The 4.2% jobless rate was the highest since January 2022. Still, March aside, the economy had added jobs every month this year, with the monthly average topping 40,000.
The participation rate, which gauges the share of the working age population in the workforce, clicked higher to a record 67.1%.
“Although the unemployment rate increased by 0.1 percentage point in each of the past two months, the record high participation rate and near record high employment-to-population ratio shows that there continues to be a high number of people in jobs, and looking for and finding jobs,” the ABS head of labour statistics, Kate Lamb, said.
“While unemployment increased to 637,000 people in July, the highest it has been since November 2021, it remains around 70,000 people below its pre-pandemic level,” she said, adding the data “suggests the labour market remains quite tight”.
The number of hours worked nudged o.4% higher, to 1.961bn, the ABS said.
The labour market figures would be closely watched by the central bank as it considered whether inflation could remain on a downward track towards its 2%-3% goal while retaining as many job gains as possible.
The RBA expected the jobless rate to rise to 4.3% by December, a level that it would consider to be close to full employment.
Prior to the release of today’s labour market figures, investors were rating the chance of an RBA rate cut of 25 basis points to 4.1% when its board next meets on 23-24 September as a 50-50 chance. Markets were also fully pricing in the odds of such a cut by the bank’s final meeting of the year in December, according to the ASX rates tracker.
The Australian dollar gained about a quarter of a US cent to 66.05 US cents on the news. Stocks, though, erased most of their gains for the day as investors pared their expectations an RBA interest rate cut might be just around the corner.
David Bassanese, the chief economist for BetaShares, said the labour figures were consistent with the RBA “remaining firmly on hold – most likely for the remainder of this year at least”.
“The combination of still solid employment growth yet rising unemployment points to the ongoing strong growth in labour supply – due to both still solid immigration and rising labour force participation,” Bassanese said. “The good news for the economy, at least, is that the RBA’s desired rise in the unemployment rate is not coming via sharp reductions in employment, but rather strong growth in labour supply relative to softer – but still firmly growing – labour demand.”
Harry Murphy Cruise, an economist with Moody’s Analytics, said the jobs market was likely to cool but “will not buckle” in coming months.
“In seasonally adjusted terms, wage growth has eased in each of the last three quarters, taking six-month annualised growth from a peak of 4.7% in the final three months of 2023 to just 3.4% in the June quarter this year,” Murphy Cruise said.
“On top of that, job vacancies fell 3.7% month-on-month in July to be at their lowest point since August 2021 and survey measures show the proportion of employers looking to expand their workforce is at its lowest since late 2020,” he said.
