Australia’s unemployment rate rises to 4.1%

Australia’s seasonally adjusted unemployment rate rose to 4.1 percent in June, up from 4 percent the previous month, according to data released by the Australian Bureau of Statistics (ABS). Despite the increase, the labor market remains relatively tight, with job vacancies at high levels. The ABS reported that employment increased by 50,000 people in June, pushing the workforce participation rate up to 69.9 percent. Bjorn Jarvis, head of labour statistics at the ABS, noted that the participation rate was only 0.1 percentage point lower than the historical high of 67.0 percent in November 2023. While the number of unemployed individuals increased by 10,000 in June compared to the previous month, current unemployment levels are still around 100,000 people, or 14.2 percent, lower than just before the COVID-19 pandemic in early 2020. The data also showed an increase in the average number of work hours, rising by 0.8 percent. This can be attributed to fewer people taking annual leave in June, although many worked reduced hours due to a wave of illnesses across the country. Economists believe that the marginal increase in the unemployment rate is unlikely to influence the Reserve Bank’s decision on interest rates next month.

Unemployment rate edges up in June

However, the upcoming inflation data will be a key factor in their deliberations. Su-Lin Ong, chief economist at RBC Capital Markets, said, “The jobs data paint a picture of a labor market that is still tight but loosening only gently.” She maintains that interest rates will likely remain on hold in August. On the other hand, David Bassanese, chief economist at Betashares, argues that the robust job data suggests strong underlying economic health, indicating a possible rate increase in August if inflation disappoints. Despite the slight rise in unemployment, there are some positive signs in the labor market. Underemployment fell by 0.3 percentage points to 6.5 percent, driven by an increase in hours worked, with most new jobs being full-time roles. Youth unemployment also decreased to 9.5 percent from 9.7 percent, marking the first decline in four months. The data also highlighted the impact of health issues on employment. Jarvis noted, “Around 4.5 percent of employed people could not work their usual hours in June because of illness, up from the pre-pandemic average of 3.6 percent.” To compensate, fewer workers took winter holidays in June, contributing to increased hours worked.