Australia’s unemployment rate increased in June to 4.1%, despite employers adding the most new jobs since February, as more people began seeking employment.
According to the Australian Bureau of Statistics on Thursday, the seasonally adjusted unemployment rate for June was 4.1%, matching economists’ expectations and up from the previously reported 4% in May. The economy saw an addition of just over 50,000 jobs, significantly surpassing the forecasted 20,000, with full-time roles increasing by 43,300 and part-time positions by 6,800.
The participation rate, a measure of those active in the job market, rose by 0.1 percentage points to 66.9%, nearing the record 67% set in November 2023, according to the ABS.
Harry Murphy Cruise, an economist at Moody’s Analytics, noted the labor market’s gradual softening. “The continued strong employment growth and near-record participation underscore how the labor market remains a buffer for workers amid economic challenges,” he said.
Federal Treasurer Jim Chalmers highlighted that the economy had added 930,000 jobs since the Albanese government took office in May 2022, marking the highest job growth for any parliamentary term. He acknowledged the positive trend but also pointed out the pressures of persistent global inflation and higher interest rates on the labor market and the economy.
The labor figures, alongside June quarter inflation data, will be closely examined by the RBA board at its next meeting on August 5-6 to decide the cash rate. Prior to Thursday’s report, investors had assessed a 15% chance of a 25-basis-point rate hike to 4.6% in August, as indicated by the ASX’s rate tracker.
The likelihood of a rate cut to 4.1% had improved slightly in recent weeks, aligning with trends in the US and other countries. However, markets did not fully price in this cut until mid-2025, despite CBA and Westpac considering it possible before the year’s end.
The robust job creation led investors to strengthen the Australian dollar, raising its exchange rate to 67.35 US cents, an increase of about 0.15 US cents on Thursday’s jobs news. Stocks saw a modest decline, falling about 0.25%.
These movements suggested that investors viewed the labor data as reducing the likelihood of an RBA rate cut and possibly even supporting another rate rise in this cycle. Blair Chapman, a senior ANZ economist, indicated that the combination of weak consumer sentiment and economic activity should lead to a continued slowdown in the labor market, with ANZ predicting the next RBA move to be a rate cut in February.
“A very strong June quarter inflation result, with data due July 31, could prompt the RBA to hike rates, but this would be contrary to broader economic data and expectations of cuts from other major central banks,” Chapman said.
Bjorn Jarvis, the ABS head of labor statistics, noted that the labor market remains relatively tight, with hours worked increasing by 0.8% despite more people than usual calling in sick last month. About 4.5% of employed people could not work their usual hours in June due to illness, compared to the pre-pandemic average of 3.6% for June. Additionally, fewer people took annual leave in June 2024, with 12.5% working fewer hours due to leave, compared to the pre-pandemic average of 14.5%.
The number of unemployed people rose by 10,000 to 608,000 in June, an increase of about 117,000 from the low in October 2022, but still around 100,000 fewer than pre-Covid levels, even as the workforce has grown.
A separate NAB monthly survey released on Thursday found that business conditions eased in the June quarter due to slow economic growth and soft consumer demand, affecting firms’ trading conditions and profitability. However, 79% of firms reported labor availability as a constraint, indicating ongoing hiring efforts.
Regionally, the lowest jobless rate was in the ACT, dropping from 3.8% in May to 3%. Queensland saw a decrease to 3.9% from 4%, and South Australia experienced a similar decline. Tasmania’s unemployment rate fell to 3.7% from 4.1% in May. In contrast, New South Wales and Victoria, which make up about half of the Australian economy, reported modest increases in unemployment rates to 3.9% and 4.5%, respectively. The Northern Territory had the highest unemployment rate at 4.6%.
