Australian employment rises further in June, currency gains

AUSTRALIAN employment surpassed expectations in June and the jobless rate held at a lower revised rate, underlining the labour market’s resilience to rapid interest-rate increases.

The jobless rate remained at 3.5 per cent, having hovered in a range of 3.4-3.7 per cent since June last year, Australian Bureau of Statistics (ABS) data showed on Thursday (Jul 20). The economy added 32,600 roles from a month prior, driven by full-time positions, and employment has now risen in nine out of the past 12 months.

The data are “reflecting a tight labour market in which employment has recently increased in line with population growth”, said Bjorn Jarvis, ABS head of labour statistics. “In addition to there being over a million more employed people than before the pandemic, a much higher share of the population is employed.”

Traders bolstered bets on the Reserve Bank of Australia (RBA) resuming rate hikes next month to a better-than 50 per cent chance. Reflecting that, the Australian dollar extended earlier gains, rising to 68.28 US cents. Three-year bond yields jumped 12 basis points, heading for their largest one-day increase since Jul 7.

While the RBA’s 12 hikes over the past 15 months are slowing demand in the economy, Thursday’s data suggest more work might be needed to loosen the labour market. RBA governor Philip Lowe has said the board will closely monitor the economy and inflation and has warned further rate rises “may be required” to tame persistent inflation.

“The ‘lucky country’ keeps on delivering strong data,” said James Wilson, a senior portfolio manager at Jamieson Coote Bonds in Melbourne. “This data is supportive of August being live, especially as it is one of the quarterly statement on monetary policy months where the RBA will be revisiting their forecasts.”

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Wilson added that “the more important piece of the puzzle will be the quarterly CPI data next Wednesday”.

Employment strength has been a key factor in the RBA’s confidence that Australia can avoid a recession. Thursday’s figures showed that annual jobs growth eased to 3 per cent from 3.1 per cent at the start of the year. The pace is expected to moderate further given job advertisements are now edging down.

The data are a mixed blessing for the centre-left Labour government. While lower unemployment is a positive, the prospect of it driving borrowing costs even higher will leave Prime Minister Anthony Albanese concerned about the potential political fallout.

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The RBA has hiked by 4 percentage points since May 2022 to take the cash rate to 4.1 per cent as it grapples with sticky inflation. A Bloomberg survey of economists last month showed the risk of a recession jumped to the highest level since the pandemic amid concerns of further tightening.

The central bank is forecasting unemployment will climb to 4 per cent by year’s end as rising borrowing costs drag on economic activity. It estimates the jobless rate will need to reach 4.5 per cent to achieve sustainable inflation around the RBA’s 2-3 per cent target.

Thursday’s jobs report also showed:

• The participation rate edged down to 66.8 per cent from 66.9 per cent.
• Underemployment held at 6.4 per cent and underutilisation edged down to 9.9 per cent.
• Full-time roles rose by 39,300 while part-time fell by 6,700.
• The employment to population ratio held at a record-high 64.5 per cent. BLOOMBERG