Australia's Labour Force Survey for July is due at 11:30am (AEST) today. Strong momentum in employment saw the unemployment rate decline from 3.6% to 3.5% in June; however, that is expected to reverse in July due to a slowdown in employment. Seasonality around the end of the financial year could have a large effect on today's report.
Employment has increased strongly in recent months...
Labour market conditions remained robust in June. Employment increased by 32.6k (on net), well above the expected 14k rise and coming on the back of a 76.5k surge reported in the May series. Employment in the full-time segment advanced by 39.3k, with part-time employment declining (-6.7k). The 3-month change in total employment was 105.3k, an expansion of 3.1% in annualised terms that outpaced growth in the working-age population on an equivalent basis (2.7%) and over the past 12 months (2.8%).
... keeping the unemployment rate around cycle lows...
The strength in employment saw the unemployment rate falling back from 3.6% to 3.5%, close to the cycle low (3.4%) from late 2022 and remaining around the lowest levels overall since the 1970s. With the underemployment rate holding at 6.4%, total labour force underutilisation declined from 10% to 9.9%, in line with 15-year lows. Alongside these outcomes, the labour force participation is sitting around record highs printing at 66.8% in June.
... and increasing hours worked
Hours worked were 0.3% higher in June and increased by 4.7% over the year. Strong labour demand has added to employee headcounts and boosted hours worked. This has seen many workers shift into full time work from part time employment. Full time hours have increased by 5.6% over the past year, by contrast part-time hours have risen by just 0.4%.
A slowdown is forecast in July...
The median estimate is for employment to slow to a rise of 15k in the month, but there is little conviction around this central view as estimates range from -20k to +45k. The high-frequency payrolls data softened over the first half of July (-0.3%); however, the reliability of that signal is questionable given the ABS noted in the release that this is a seasonally volatile period, coinciding with the end of the financial year and school holidays. Based on an expected slowdown in the employment figure, and the participation rate holding at 66.8%, the unemployment rate is anticipated to tick up to 3.6% (range: 3.5% to 3.7%).
... but this may be due to seasonal volatility
Seasonal effects around the end of the financial year raise the level of uncertainty going into today's report. If last year is any guide, the risks around the employment outcome look to be to the downside of expectations. In July 2022, employment snapped a run of strong gains posting a 3.1k decline but then bounced back with an above-consensus rise in August (56.8k). If employment does print soft today, some caution would be warranted in the analysis - particularly given the momentum of employment through the June quarter.
