The Australian Bureau of Statistics (ABS) has released its latest unemployment figures.
Unemployment remains at 3.5% with the job market taking a steady as she goes approach. Data shows that about 32,600 people found work in June, countering economists’ expectations for modest employment growth of 15,000.
The unemployment rate remained within the narrow 3.5% to 3.7% range it has hovered in since June 2022.
The ABS noted that employment gains of at least 31,000 were needed each month to stop unemployment from ticking higher. The figures are based on the current rates of population growth and participation rates remaining unchanged.
Weakness in the market is expected.
CreditorWatch chief economist Anneke Thompson said, “Unemployment remained unchanged today, however, we expect that weakness will emerge in the labour sector as we move through the second half of 2023.
“Major firms like Telstra, Lend Lease and Westpac have announced redundancies as part of restructuring. We expect that as business conditions continue to weaken and profit margins fall, headcounts will get a lot of attention, particularly given the very strong headcount growth since the pandemic.”
Thompson noted that the CreditorWatch June Business Risk Index pointed to continued caution amongst the business community.
“There has been a record number of credit enquiries performed by our customers. This tells us that businesses are less prepared to offer credit to poor paying customers, as cash is now so critically important.”
As for the Reserve Bank of Australia and what it makes of the decision, Thompson said, “Today’s rate will not help the RBA solidify their position ahead of August’s board meeting. Next week’s monthly inflation figure will now be even more crucial to the outcome. At this point, we still err on the side of another increase at the August meeting.”
RBA to remain uneasy
Higher interest rates have begun to have an effect on household spending, however, the slowdown in discretionary spending is yet to spill over into the jobs market. This remains extremely tight by historical standards.
Key statistics show:
- unemployment rate remained at 3.5%;
- participation rate remained at 66.8%;
- employment increased to 14,045,800;
- employment to population ratio remained at 64.5%;
- underemployment rate increased to 6.4; and
- monthly hours worked increased to 1,956 million.
- unemployment rate remained at 3.5%;
- participation rate decreased to 66.8%;
- employment increased to 14,046,100;
- employment to population ratio remained at 64.5%;
- underemployment rate remained at 6.4%;
- monthly hours worked increased to 1,947 million;
- full-time employment increased by 39,300 to 9,868,900 people; and
- part-time employment decreased by 6,700 to 4,177,100 people.
“The Australian economy has added 32,000 new jobs in June versus 15,000 expected and the unemployment rate has surprisingly fallen back to 3.5% vs 3.6% expected. Another set of red-hot job numbers will only add to the RBA’s unease about a tight labour market and sticky inflation,” Sycamore said.
“Earlier this week, the RBA meeting minutes from July put the focus firmly on incoming data, including today’s labour data and next Wednesday’s inflation data, ahead of the RBA’s August board meeting.
“The hotter-than-expected jobs numbers, which has the unemployment rate edging back towards a 50-year low, despite 400bp or rate hikes from the RBA, leave no room whatsoever for an upside surprise in next Wednesday's Q2 CPI data. More so given the RBA’s stated concerns around wage growth and inflation.”
Inflation data is expected next Wednesday.
“The expectations ahead of Wednesday’s inflation numbers are for headline inflation to fall to 6.2% YoY from 7%. The RBA's preferred measure of core inflation, the Trimmed Mean, is expected to fall to 6.2% YoY from 6.6% previously. Presuming the inflation numbers come in as expected, it likely supports the idea of a follow-up pause in August,” Sycamore said.
“However, if next week’s headline inflation comes in at 6.4% or higher, brace for another rate hike as the RBA is forced to respond to a tight labour market and sticky inflation.
Sycamore said the probability of a 25bp rate hike from the RBA in August had risen to about 40%.