Australian employment continues to remain strong in the face of expectations for a slowdown amid weaker growth. Employment lifted by 50.2k, outperforming the market consensus for the third month running, and by a considerable margin relative to June's forecast (20k). Although the unemployment rate lifted from 4.0% to 4.1%, this came alongside a rise in the labour force participation rate to near record highs.
By the numbers | June
- Employment increased by a net 50.2k in June - its strongest outcome in 4 months - defying expectations for a moderation to a 20k rise following gains of 39.5k in May and 36.2k in April.
- Headline unemployment lifted from 4.00% in May to 4.05% in June, rounded up to 4.1% by the ABS in today's report, matching expectations. Underemployment declined from 6.7% to 6.5%, resulting in a fall in total underutilisation to 10.5% from 10.7% in May.
- Labour force participation increased from 66.8% to 66.9%, pushing 2023's record highs.
- Hours worked increased by 0.8% in the month (1.4%yr) to be up by a robust 1.6% across the June quarter.
The details | June
After increasing solidly in April and May, employment accelerated to a 50.2k net rise in June - against expectations for a moderation. In the latest month, the gain was driven by full time employment (43.3k), with the part time segment also expanding (6.8k). Highlighting that labour demand remains resilient to slowing growth through the first half of the year, employment increased by 125.8k (0.9%) in the June quarter, matching the growth seen in the March quarter (128.3k, 0.9%). These outcomes are also a clear step up from the employment gains seen in the final three quarters of 2023: 84.5k in Q2, 78.5k in Q3 and 55.8k in Q4.
Given the strength in employment, the unemployment rate was held to an average of 4% across the June quarter - up only slightly from Q1 (3.9%) and a little above the cycle lows of 3.5% in late 2022/early 2023. Although tightness in the labour market has eased, these are still very historically strong conditions in Australia. Speaking to this point, the Bureau noted in today's reporting that both underemployment (6.5%) and underutilisation (10.5%) - broader measures of spare capacity in the labour market - remain significantly lower than on the eve of the pandemic, down by 2.3ppts and 3.4ppts on their respective levels in March 2020.
On the supply side of the labour market, the participation rate increased to 66.9% in June to stand very near to record highs; this is also the case for the employment to population ratio - the share of working-age Australians in employment - at 64.2%. Inward migration post the pandemic has added strongly to labour supply and contributed to economic demand, helping to keep employment supported.
Rounding out a solid report, hours worked lifted by 0.8% in the month. Although illness-related absences remained elevated (4.5% of employed people worked fewer hours than usual in June compared to a pre-pandemic average of 3.6%), this was offset by a reduction in annual leave, with 12.5% of employed people working reduced hours due to being on holiday, well down on the pre-Covid average of 14.5%. Overall, hours worked expanded by a robust 1.6% in the June quarter.
In summary | June
Despite a backdrop of slowing economic growth, the Australian labour market remains resilient. Labour market tightness has eased; however, employment growth is solid, unemployment is low and participation is near record highs. This is all broadly in line with RBA forecasts and in that sense today's report is unlikely to change assessments ahead of the meeting on 5-6 August. If there is to be another hike in this cycle, it will be in response to an upside surprise in the CPI report for Q2 (31 July).
