Unemployment rate rises to 4.1 per cent

The unemployment rate has risen slightly to 4.1 per cent, seasonally adjusted, for June, in line with expectations.

But the growth in employment and labour force participation was higher than predicted.

The Australian Bureau of Statistics (ABS) released the latest labour force data on Thursday.

“With employment rising by around 50,000 people and the number of unemployed growing by 10,000 people, the unemployment rate rose slightly to 4.1 per cent and the participation rate rose to 66.9 per cent,” Bjorn Jarvis, ABS head of labour statistics said.

“The participation rate in June was only 0.1 percentage point lower than the historical high of 67.0 per cent in November 2023.

“The employment-to-population ratio rose by 0.1 percentage point to 64.2 per cent, which was also close to its historical high of 64.4 per cent in November 2023.”

Mr Jarvis said the growth in unemployment in June followed a fall of 9000 people in May.

“While it has increased from a low of 491,000 people in October 2022 to 608,000 in June, it is still around 100,000 people or 14.2 per cent lower than just prior to the Covid-19 pandemic,” he said.

“The unemployment rate was 0.5 percentage points higher than June last year, and 1.1 percentage points lower than March 2020,” Mr Jarvis said.

The Reserve Bank is closely monitoring the jobs market for signs its 13 rate hikes to date are cooling the economy, with the board slated to announce its next rate decision on August 6.

Oxford Economics Australia’s lead economist Ben Udy said Thursday’s data wouldn’t have too much of an impact on the rates, and maintained the RBA would hold the cash rate at 4.35 per cent.

“By far the more important thing will be the inflation data which will come up on the 31st of July,” Mr Udy said.

“We’re also not expecting a big rise in inflation which is driving the market speculation of a rate increase.”

Mr Udy said while there had been a “very gradual loosening in the labour market,” it continues to remain really tight.

“The monthly labour market has been volatile over the last year, and in part that’s been driven by the timing of holidays and people being reluctant to start new jobs after Christmas and Easter,” he said.

“Even though the unemployment market ticked up, the labour market remains really tight – a rise in employment of 40,000 is a really strong result and the fact that the strength was focused in full-time employment meant the underemployment rate actually ticks down a little bit.”

BDO Economics Partner Anders Magnusson dismissed concerns Australia’s continued tight labour market would cause inflation to accelerate.

He said while Thursday’s 4.1 per cent rate was below 4.3 per cent, which the RBA estimates is the non-accelerating inflation rate of unemployment, Mr Magnusson pointed to other labour market factors such as decreasing job mobility, decreasing job vacancies and decreasing job advertisements, as signs the market is in fact, weakening.

He also tipped the RBA to hold the cash rate in August.

“The May monthly inflation data provided a misleading impression that inflation was accelerating,” he said.

“In fact, the monthly data showed that prices were lower in May than in April but the annual measure showed an increase in inflation due to a quirk in the annual ‘point to point’ method the ABS chooses to measure it.

“The RBA’s decision next month should primarily consider the upcoming quarterly CPI release and not the monthly inflation data.

“I expect the quarterly inflation data to show no major increase in inflation and the RBA to continue to hold the cash rate as a result.”

More to come