As hiring exceeded all forecasts, Australia’s unemployment rate fell to a 48-year low in June. Record-high job openings signalled that the labor market was poised to tighten even further, which may possibly explain higher interest rate hikes.
According to data released by the Australian Bureau of Statistics on Thursday, net employment increased by 88,400 in June compared to May, when it increased by 60,600. That exceeded market expectations for a June increase of 30,000 and boosted increases for the year to a roaring 438,000.
The unemployment rate decreased from 3.9 to 3.5 percent, far below the forecasted level of 3.8 percent and the lowest level since August 1974.
The decline occurred despite an increase in job seekers, with the participation rate reaching a record high of 66.8%.
Indicating that wage growth will pick up speed over time, the underutilisation rate, which includes underemployment and unemployment, maintained at 9.6 percent, its lowest level since 1982.
While layoffs were relatively few, the number of unemployed also decreased by an exceptionally big 54,300.
Bjorn Jarvis, head of labor statistics at the ABS, said that these movements “suggest an increasingly tight labor market, with high demand for engaging and retaining people, as well as continuous labor shortages.”
He observed that the 494,000 unemployed persons now almost exactly matched the 480,000 open positions.
According to him, there is around one unemployed individual for every open position, down from three times as many before the pandemic began.
Following last week’s half-point increase to 1.35 percent, the Reserve Bank of Australia (RBA) is widely expected to continue raising interest rates because the economy is virtually experiencing full employment and inflation is running hot.
Markets anticipate an additional 50 basis points in August, and there has even been some discussion of a more radical change if upcoming inflation data surprises on the high side, as it has done globally.
Investors are betting that the Federal Reserve will raise interest rates by a full percentage point as a result of the eye-watering 9.1 percent figure for U.S. consumer prices in June, but the Bank of Canada stole a march by doing just that on Wednesday.
On July 27, Australia’s consumer price report for the second quarter is expected. Analysts had previously predicted that inflation would reach its highest level since 1990 at about 6.3 percent, and that things would get worse before the year is out.
“The economy is bumping-up against capacity constraints in several areas,” said Andrew Boak, a Goldman Sachs economist. “The jobless rate is at a 48-year low, assessed business conditions substantially above long-run averages, and COVID-related mobility restrictions have largely alleviated.”
The Australian economy, which had a good start to the cycle of tightening, “remains on a course to significantly higher inflation and interest rates.”
