The unemployment rate’s move to 4.5% is a genuine miss against 4.4% forecasts and takes the jobless rate to its highest level since late 2021, a signal likely to firm up expectations that the RBA has room to pause its hiking bias rather than push through further increases in the near term. That said, the softness is not uniform: full-time employment actually rose in July, the entire decline was driven by part-time roles, and the three-month average pace of employment growth still sits at a reasonably firm 34k, with the three-month average jobless rate unchanged at 4.4%. That combination points to a labour market that is softening gradually rather than deteriorating sharply, which should give the RBA room to assess the cumulative effect of its policy settings without feeling pressured into an immediate response either way. The Australian dollar is likely to come under some pressure given the scale of today’s headline miss, though the sizeable upward revision to June’s data should temper the reaction somewhat.
—
Australian employment unexpectedly fell in July and the jobless rate climbed to its highest since late 2021, though the decline was driven entirely by part-time roles and June’s print was revised sharply higher, pointing to gradual rather than sharp labour market softening.
Summary:
- Employment fell 15.8k in July, against expectations for a modest rise, while June’s employment gain was revised up to 80.2k from the initial 76.3k estimate
- The unemployment rate rose to 4.5% from 4.4%, its highest level since late 2021, while the participation rate slipped to 66.9% from 67.0%
- The employment-to-population ratio fell 0.2% to 63.9%
- The entire employment decline was driven by part-time roles, which fell 32.1k, while full-time employment rose 16.3k
- Hours worked fell 0.6% m/m
- On a three-month average basis, employment growth still runs at +34k, while the three-month average unemployment rate was unchanged at 4.4%
- Employment has risen 145.8k so far this year
Australian employment unexpectedly fell in July after a bumper gain in June, with the unemployment rate climbing to its highest level since late 2021 and suggesting there is more slack building in the labour market than previously thought, according to data released Thursday.
Employment dropped 15.8k in the month, confounding expectations for a further rise following June’s outsized gain, which was itself revised up to 80.2k from the initial 76.3k estimate, alongside a stronger full-time component. The unemployment rate rose to 4.5% from 4.4%, while the participation rate eased to 66.9% from 67.0% and the employment-to-population ratio fell 0.2% to 63.9%. Because the drop in participation partly offset the fall in employment, the unemployment rate only edged higher at the second decimal place, a detail that tempers the headline move somewhat.
The composition of the decline is notable. The entire fall in employment was driven by part-time roles, which dropped 32.1k, while full-time employment actually rose 16.3k over the month. Hours worked fell 0.6% on the month, adding to signs of a softer labour market even as the underlying full-time trend held up. The employment-to-population ratio and month-to-month swings in the data are known to be volatile indicators, and taken together with the sizeable upward revision to June, the report reads as a labour market that is softening gradually rather than one that has turned genuinely loose.
That reading is reinforced by the three-month trend, where average employment growth still sits at 34.2k and the average unemployment rate has been unchanged at 4.4%, both considerably steadier than the single-month numbers suggest. Year to date, employment has grown 145.8k, an improvement on the 104.9k added over the same period last year.
Today’s data gives the Reserve Bank of Australia additional time to assess how its policy settings are flowing through to the economy, with the gradual, rather than sharp, nature of the softening likely to keep the central bank in no rush to shift its current stance.
The bank next meets end-September:
This article was written by Eamonn Sheridan at investinglive.com.