An improved reading on Australian labour market conditions saw employment rising in line with expectations by 25k in July. The unemployment rate fell to 4.2% after hitting a 3½-year high in June of 4.3%. There was minimal reaction in markets, with the report only shoring up expectations that further rate cuts are on the table, as RBA Governor Bullock indicated following the 25bps cut announced on Tuesday.
By the numbers | July
- Employment lifted by a net 24.5k in July, all but matching the 25k consensus after a 1k rise in June (revised from 2k). Full time employment (60.5k) surged by its most since February last year, but part time employment fell (-35.9k).
- The unemployment rate fell from 4.3% to 4.2%, in line with expectations. Declines were also seen in underemployment (6% to 5.9%) and total underutilisation (10.3% to 10.1%).
- Labour force participation came in at 67.0%, unchanged after a downward revision was made to the 67.1% figure initially reported for June. Rounding saw the employment to population ratio rise from 64.1% to 64.2%.
- Hours worked rose by 0.3% month-on-month in July, partially rebounding from a 0.9% fall in June. After revisions, annual growth remained at 2.1%.
The details | July
Employment posted its best result in 3 months rising by 24.5k in July (0.2%), an outcome that steadies the ship after the disappointing figures for May (-3k) and June (1k). The gain was driven entirely by a 60.5k increase in full time employment (0.6%), the strongest gain by the segment in 17 months. This was partially offset by a 35.9k fall in part time employment (-0.8%), its 4th monthly decline this year. Due to the earlier weakness, employment gains over the past 3 months averaged just 7.5k - well below its 20-40k range through most of last year.
Following the pick up in employment and helped by the participation rate holding at 67% - a lower level than earlier reported for June - the national unemployment rate fell to 4.2% from 4.3%. Recall, the unemployment rate shocked markets after rising from 4.1% to 4.3% in June, its highest level since November 2021. This was a factor in the RBA's decision to cut the cash rate by 25bps earlier this week, though the RBA still saw the labour market as tight. The partial reversal of the increase in the unemployment rate was also backed up by falls in the underemployment rate from 6% to 5.9% and in total underutilisation from 10.3% to 10.1%.
Hours worked rose by 0.3% in July, a positive result on the surface but a little underwhelming coming on the back of the sharpest fall in more than 2 years in June (-0.9%). Growth in hours worked was 2.1% over the 12 months to July, an unchanged pace from June. Reflecting the employment outcomes, full time hours increased by 0.7% (2.3%yr) while part time hours fell by 1.5% (1.1%yr).
In summary | July
Today's report was welcome after the data for May and June had raised concerns that the labour market was cooling at a faster pace than previously thought. There is still a lot of choppiness in the jobs figures in particular, so rushing to conclusions - in either direction - would be unwise. The decline in the unemployment rate to 4.2% is the main story today. Overall, this is indicative of a labour market that remains in fairly robust shape; however, as the RBA noted in its decision on Tuesday, further rate cuts are likely to be needed to keep it ticking along.
