Australia's Labour Force Survey for August is due at 11:30am (AEST) today. Coming off a weak month in July, employment is expected to return to its earlier momentum with a 25k rebound. The unemployment rate is seen falling back to 3.6%, just above 50-year lows with labour force participation holding near record highs.
Labour market activity was surprisingly weak in July...
The labour market hit turbulence in July as employment unexpectedly fell by 14.6k (vs +15k forecast), driving up the unemployment rate from 3.5% to 3.7%. This was the weakest employment outcome since the 2021 pandemic lockdowns - coming against the run of play from the strength in employment in the June quarter (103.2k).
... likely due to seasonal factors
In addition to the uptick in unemployment, the participation rate declined from 66.8% to 66.7%. The weakness on both the demand and supply side appears to be linked to seasonal volatility in the post-pandemic labour market. The ABS highlighted it had detected changes in hiring patterns compared to historical trends, with school holidays falling during the survey period for the July series. A similar dynamic occured in April when employment also fell (-4.7k). Hours worked softened from a 0.4% lift in June to a 0.2% increase in July (5.2%yr).
A rebound is expected in the August report...
Employment is anticipated to rebound by around 25k in August, although economists' estimates vary significantly from -20k to 50k. A fall in the unemployment rate from 3.7% to 3.6% is forecast (range: 3.6% to 3.9%), based on the participation rate remaining broadly unchanged (66.7%). The ABS's payrolls series provides support for the expected rebound. The payrolls index stabilised over the month to mid-August, improving from a decline (-0.3%) for the month to mid-July.
... as employment growth remains key
Amid rapid post-pandemic population growth and with labour force participation around record highs, sustaining solid momentum in employment growth is key to preventing a rise in unemployment. The RBA forecasts an uplift to 4.5% unemployment in a couple of years' time as below-trend economic growth leads to slowing employment gains. In my articles, I have highlighted that a more optimistic situation could evolve in which population growth keeps employment supported for longer than anticipated. Job vacancies are off their highs but remain elevated, consistent with an outlook for still-robust labour demand.