Australia's monthly read on the labour force is due to be published this morning (1130 AEST), today's report covering July. The unemployment rate ended a 5-month stretch at 4.1% rising to 4.3% last time out after employment growth effectively came to a standstill over May and June. The RBA continues to assess the labour market as tight, but signs of easing played a role in its decision to cut the cash rate by 25bps to 3.6% earlier this week. In its updated outlook, the RBA retained its forecasts for the unemployment rate, which it expects to rise no higher than its current level on a sustained basis, based on further cuts to the cash rate. Markets are pricing in at least an additional 50bps of easing.
July preview: Can employment rebound?
Employment gains have largely dried up after back-to-back months of disappointing outcomes, but a rebound of 25k is expected to be reported today for July. The range of forecasts sits between 15-50k, once again remaining wide reflecting the elevated volatility in the monthly employment series over recent times.
On the basis of the expected rebound in employment, markets look for the unemployment rate to fall back to 4.2% in July from its current level of 4.3% (range: 4.2-4.4%). Because labour force participation is elevated near record highs at 67.1% - assuming that holds today - a solid to strong employment outcome will be needed to push the unemployment rate down again.
June recap: Unemployment rate rises to its highest since late 2021
The June Labour Force Survey delivered a shock as employment failed to meet expectations for the second month running, lifting the unemployment rate to a 3½-year high. Employment rose by just 2k on net in June (full time -38.2k/part time 40.2k) - well below the 20k rise forecast - after falling by 1.1k in May. While employment effectively went nowhere in May and June, it still rose by a fairly robust 86.4k (0.6%) across the quarter due to a strong figure in April (85.5k).
Stalling employment growth alongside an increase in labour force participation to 67.1% (from 67%) saw the unemployment rate rise for the first time since the beginning of the year. Headline unemployment lifted from 4.1% to 4.3% in June to stand at its highest since November 2021. In addition, underemployment rose from 5.9% to 6%, driving total underutilisation 0.3ppt higher to 10.3%.
Rounding out a weak report, hours worked declined by 0.9% in June, slowing annual growth from 3.1% to 1.8%. The weakness centred in full time hours (-1.3%), with part time hours rising (0.8%). Hours worked in the June quarter lifted by a modest 0.4%.
