Australia's Labour Force Survey is due from the ABS this morning (1130 AEST). A rebound in employment in July (24.5k) saw the unemployment rate fall back to 4.2%, partly reversing its rise in the prior month to highs since late 2021 at 4.3%. July's solid labour market report was followed by a revival in household consumption driving stronger-than-expected economic growth (0.6%) in the June quarter. Markets are priced for two further RBA cuts to a terminal cash rate of 3.1%; however, that outlook could be revised if the labour market shows renewed signs of strength.
August preview: More of the same expected
In today's report, employment is expected to increase by 22k, a similar outcome to the 24.5k lift last time out. The range of forecasts for employment sits been 9.5k on the low side to 32.5k on the top side. As the chart (below) shows, volatility in monthly employment (green line) has been elevated since late last year.
Given employment is expected to rise solidly, the unemployment rate is forecast to remain steady at 4.2% (range: 4.2-4.3%). Labour force participation has come in at 67% for the past 3 months; if that were to shift - in either direction - it may have implications for the unemployment rate. That is where the volatility for markets likely sits going into today's report.
July recap: Employment bounces back
Employment lifted by a net 24.5k in July, essentially in line with expectations (25k) in a rebound from weaker prints in May (-3k) and June (1k). July's gain was driven entirely by a 60.5k increase in full time employment - the segment's largest rise since February last year - as part time employment declined by 35.9k.
The rise in employment together with the participation rate remaining at 67% lowered the unemployment to 4.2%, partially reversing its rise from 4.1% to 4.3% in June - a 3½-year high. Additionally, the broader underemployment rate - including workers wanting more hours - declined from 6% to 5.9%. The combination of lower unemployment and underemployment saw the total labour force underutilisation rate fall from 10.3% to 10.1%, around half a percentage point up from cycle tights but still at a historically low level.
Hours worked, coming off a steep fall in June of 0.9% - its weakest outcome since May 2023 - saw a modest 0.3% rebound in July. This slightly outpaced the rise in employment (0.2%). Annual growth in hours worked was tracking at a 2.1% pace overall.
