Surging employment lowered Australia's unemployment rate sharply to 3.5% in June to post at a new low dating back to 1974 as the participation rate increased to a new record high of 66.8%. Despite the disruptions to businesses caused by staff absences due to Omicron and the flu, hours worked still lifted strongly over the June quarter.
Labour Force Survey — June | By the numbers
- Employment surged above expectations rising by 88.4k in June (vs 30k expected), lifting from a 60.6k increase in May.
- Australia's unemployment rate fell from 3.9% to 3.5% (vs 3.8% expected), its lowest since August 1974. Underemployment ticked up by 0.3ppt to 6.1%, leaving total labour force underutilisation steady at its 40-year low of 9.6%.
- The participation rate reset to a new record high, rising from 66.7% to 66.8%. The national employment to population ratio increased 0.3ppt to 64.4%, also a record.
- Hours worked were flat in the month, held back by high staff absences, but were up sharply over Q2 (4.6%).
Labour Force Survey — June | The details
Australia's unemployment rate has fallen to a new low for the cycle, declining sharply from 3.9% in May to 3.5% in June. This is its lowest level since August 1974 and compares to the peak of 7.5% it hit during the national lockdown in 2020.
Employment increased by a multiple of the expected outcome rising by 88.4k in June, increasing from the strong outcome in May (60.6k). Full time employment increased by a further 52.9k (now up by 359.9k over the first half of 2022) and continued to drive the headline rise in employment. Part time employment, however, increased by 35.5k, its strongest rise in 7 months (down 63.5k in 2022).
Although employment slowed during March-April, the momentum has re-accelerated, consistent with the high level of job vacancies, increasing hours, and the underlying strength in the economy. These factors have supported the rotation to full time employment. For Q2 overall, employment lifted by more than 7%q/q to 153.5k. Employment is now 4.6% above pre-Covid levels.
With employment surging, the participation rate has again reset to a new record high at 66.8%. Meanwhile, the share of the working-age population in work now stands at 64.4%, an increase of around 2ppts from pre-Covid levels.
Hours worked came in flat in June, remaining at 4.9% above their pre-Covid level. This came after increases of 1.3% in April and 0.9% in May, resulting in a 4.6% surge in Q2 that will drive a strong Q2 GDP result. This is a highly impressive rebound from Q1 where total hours fell by 1%, impacted by the Omicron wave and the east coast floods.
June's weakness in hours worked looks to have been held back by the continuing disruptions caused by staff absences due to Omicron and the flu and for caregiving reasons. Combined, these factors saw more than 1.1 million Australians working fewer hours than usual in June, a similar level to May.
Driven by the flat outcome for hours worked in June, there was a slight uptick in the underemployment rate, from 5.7% to 6.1%, while underutilization in the labour force held steady at its 40-year low of 9.6%.
Labour Force Survey — June | Insights
Australia's unemployment rate fell sharply to 3.5% as the participation rate lifted to a new record high. Employment has surged over May-June, defying assessments that hiring was slowing over March-April. The high level of job vacancies should continue to support a further tightening in the labour market. The strength of today's report has prompted calls for a larger rate hike from the RBA than the 50bps increase expected. However, I see the upcoming Q2 CPI report as more likely to be the catalyst for the RBA to step up the pace of its next increase.