Australia’s employers shed jobs last month and the jobless rate rose, underscoring the Reserve Bank’s prediction that the labour market was near a turning point.
The unemployment rate in July was 3.7% with the economy losing a net 14,600 jobs, the Australian Bureau of Statistics said. Economists had predicted the jobless rate would tick higher to 3.6% from June’s reported 3.5% rate, with a net 15,000 increase in jobs.
The reduction in jobs came entirely from a drop in full-time employment, with 24,200 such jobs cut in July. Part-time employment rose by 9,600.
The increase in the jobless numbers will give the Reserve Bank more reason to extend their pause on interest rates to a third consecutive month when the board meets next month. In recent days, the odds of a September rate rise have been less than 10%.
Traders took that cue, sending the Australian dollar down by almost a quarter of a US cent to trade at about 63.75 US cents.
Stocks, which tend to benefit from lower interest rates, pared losses for the day to about 0.9%.
“Long regarded as a lagging indicator but careful not to overplay a single data point, the weaker-than-expected July employment report vindicates the RBA’s more cautious stance on monetary policy and combined with soft online prices, further solidifies the view that the hiking cycle is at an end,” said Dwyfor Evans, a senior strategist at State Street Global Markets.
The Reserve Bank predicts the unemployment rate will rise to 4.5% by the end of 2024, an increase of a percentage point from June’s level. Some economists consider a shift of that level as signalling a recession.
Still, the economy has added about 1m jobs since the depths of the Covid pandemic and the jobless rate has hovered near half-century lows for almost a year.
Turning point for the jobless rate, as it ticks up to 3.7%? Might not see 3.5% again for a while. (@ABSstat) pic.twitter.com/GnHczUD8hh
— @phannam@mastodon.green (@p_hannam) August 17, 2023
“The fall in employment [of about 14,600 jobs] follows an average monthly increase of around 42,000 people during the first half of this year,” said Bjorn Jarvis, the ABS head of labour statistics. “Employment is still around 387,000 people higher than last July.”
“While unemployment increased by 36,000 people in July, to 541,000, it was still around 172,000 lower than before the pandemic.”
The participation rate eased back to 66.7%, while the underemployment rate was steady at 6.4%, seasonally adjusted.
In a sign of underlying demand for labour, monthly hours worked increased 0.2% in July 2023, while employment decreased 0.1%. Some of the increase in hours worked reflected fewer people than usual taking leave during the school holidays, the ABS said.
“The strength in hours worked shows that it continues to be a tight labour market,” Jarvis said. “Hours worked were 5.2% higher than in July 2022, well above the 2.8% annual increase in employment.”
“The strength in hours worked over the past year, relative to employment growth, shows the demand for labour is continuing to be met, to some extent, by people working more hours.”
New South Wales and Queensland were the main contributors to the uptick in the unemployment rate. NSW’s record low 2.9% jobless rate in June increased to 3.3% last month, a level that remains the nation’s lowest ahead of Western Australia’s 3.4%.
Queensland’s jobless rate jumped from 3.6% to 4.5% in July, trailing only Tasmania’s 4.7%. Victoria’s rate improved to 3.6% from 3.7%.
Ben Udy, the lead economist for Oxford Economics Australia, said “the deterioration in the labour market has a long way to run before the RBA can completely relax”.
“We already thought the RBA had completed its current hiking cycle with 4.1% marking the peak in rates,” Udy said. “Today’s data are likely to be the final nail in the coffin for any lingering expectations of a rate hike in September.”
Separately, the ABS also reported average weekly earnings figures that showed those for full-time employees were up 3.9% for the year to May. The earnings gap between men and women also narrowed to a record low of 13%.
Average weekly earnings for full-time adults rose 3.9% in the year to May to $1838, @ABSStats says. If you squint you may spy the male-female gap has narrowed to a record low 13%. pic.twitter.com/UfMfMXStVl
— @phannam@mastodon.green (@p_hannam) August 17, 2023
Teachers and nurses – two professions typically dominated by women – getting paid more accounts for some of that narrowing.
The weekly increase of $68 was the strongest annual growth since May 2013 excluding a burst during early Covid days, the ABS said. Wages data for the June quarter released earlier this week showed real wages continue to retreat on an annual basis.
The current quarter will likely show a sharper spike in weekly wages once the effects of the Fair Work Commission’s 8.6% minimum wage and 5.75% award wage increases from 1 July have an impact.
