Unemployment rate falls to 3.5% as the economy adds 32,600 jobs in June on latest ABS figures

Last month, the number of jobs in Australia increased by 32,600 despite a rise in interest rates, showing the strong durability of the economy.

According to the Bureau of Statistics, Australia experienced a 3.5% unemployment rate in June. Experts had predicted that the rate would stay the same as May's 3.6% figure, with an additional 15,000 job opportunities. The ABS later adjusted May's rate to 3.5% as well.

Bjorn Jarvis, the head of labour statistics at ABS, mentioned that the surge in job opportunities during June resulted in the employment-to-population ratio retaining its remarkable peak of 64.5%. This statistic highlights the existence of a competitive labor market in which the number of employed individuals has steadily risen alongside the growth of the population. Jarvis also highlighted the significant achievement of the economy, which has successfully generated one million jobs since the onset of the pandemic.

The Reserve Bank will carefully analyze the employment data and inflation statistics for the June quarter, which will be released next Wednesday. This analysis is crucial as it will influence the decision of whether to extend the current pause on raising interest rates, which was implemented in July. The board will convene on 1 August to discuss this matter.

The RBA has implemented a significant rise in interest rates, amounting to 400 basis points, starting from May 2022. This move represents the most intense tightening of monetary policy witnessed in the past thirty years. The minutes from the RBA's meeting in July indicated that there is still minimal room for more job growth in the job market, as vacancies continue to remain at exceptionally high levels.

The value of the Australian currency increased by 0.25 US cents to reach 68.25 US cents. This happened as investors adjusted their predictions for another potential interest rate increase by the Reserve Bank of Australia. As a result, publicly-traded companies, which are influenced by the rise in lending expenses, experienced a slight decline in their stock prices. Consequently, the overall market gain for the day reduced to 0.2%.

In terms of employment numbers, the economy saw an increase of 39,300 full-time jobs in the previous month, while simultaneously losing 6,700 positions in the part-time sector.

The decreased number of people taking part in the workforce influenced the decreased unemployment figure. This figure slightly decreased by 0.1% to 66.8% compared to the previous month's unusually high percentage, according to Jarvis. The percentage of women participating in the workforce reduced by 0.2% to 62.5%, while for men, it increased by 0.1% to 71.3%.

In the month of June, there was a 0.3% rise in the number of hours worked, which further indicates the robust demand for workers.

"In the last year, there has been a 4.7% growth in working hours, surpassing the 3% growth in the number of people employed," stated Jarvis.

In terms of the states, New South Wales maintained its top position. The unemployment rate dropped to an unprecedented 2.9% in June, down from 3% in May.

The rate of joblessness in Queensland decreased to 3.6% in June, compared to the previous month's 3.9%. Meanwhile, Victoria's unemployment rate remained steady at 3.7%.

David Bassanese, the main economist at Betashares, stated that the robustness of the labor market "will push" the RBA to raise its cash rate even further. The importance of the consumer price index data for the June quarter, set to be published on the 26th of July, cannot be underestimated in determining this decision.

"Even though the significant increase in employment can be partially attributed to a resurgence in the number of people joining the workforce (due to increased immigration and participation), what stands out in the latest labor market reports is how effortlessly all these newly accessible individuals are securing employment," Bassanese commented.

"He mentioned that the general robustness in the job market is expected to support household earnings, offsetting the effects of increased interest rates on the ability to spend."

According to Pat Bustamante, an experienced economist at Westpac, the employment statistics clearly indicate that the market is still incredibly robust.

Bustamante stated that even though indicators for the labor market are indicating a decrease in opportunities, the current outcome demonstrates that there is enough demand to create jobs for the rapidly expanding labor force in Australia.

"When you take into account the current outcome along with the recent wage decisions, such as the Fair Work Commission's decision for 2023-24, we still anticipate the Reserve Bank to exercise caution and increase rates by 25 basis points in August," he stated. "Nevertheless, as we come near the conclusion of the tightening phase, every monthly meeting will be unpredictable and evenly poised."