Australia experienced a modest increase in its unemployment rate in June, despite a considerable number of job vacancies available across the nation. According to the latest data released by the Australian Bureau of Statistics (ABS) on Thursday, the seasonally-adjusted unemployment rate rose to 4.1% in June, up from 4.0% in May, which translates to approximately 10,000 additional individuals finding themselves without work.
In contrast to the rise in unemployment, the underemployment rate showcased a decline, falling to 6.5% last month from 6.8% in May. Additionally, the underutilization rate, which combines both unemployment and underemployment figures, decreased to 10.5%, a drop from 10.7%. This indicates a slight improvement in the overall employment landscape, although with nuances that merit consideration. Despite these developments in the unemployment metrics, employment levels saw a significant rise, with around 50,000 new jobs added in June, bringing the total employment figure to a robust 14.4 million.
This figure exceeded the expectations set by ANZ Research, which had estimated a 30,000 increase in headcounts. The labor market continues to demonstrate tightness, reflected in the increase of the employment-to-population ratio to 64.2% in June. The ongoing high levels of job vacancies indicate a demand for labor, despite the rising unemployment rate.
The hours worked in June also saw an increase of 0.8%, a result of fewer individuals taking annual leave compared to previous months, which helped to offset the reduction in working hours due to health-related issues. Bjorn Jarvis, who leads Labor Statistics at ABS, noted that the trend of more workers than usual needing to work reduced hours due to illness persisted, akin to the patterns observed in May.
However, he also highlighted that about 12.5% of individuals were working fewer hours due to leave, standing in contrast to the pre-pandemic average of 14.5% for the same month. Looking ahead, the Australian economic outlook appears to be one of caution. Senior Economist at ANZ Research, Blair Chapman, expresses that although employment has increased, the labor market is anticipated to slow down further.
This slowdown is attributed to a combination of factors including the growth in employment, a drop in hours worked, diminishing consumer sentiment, and overall sluggish economic activity. Chapman suggests that these trends could lead the Reserve Bank of Australia (RBA) to consider cutting interest rates. Moreover, Chapman mentioned that any significant Q2 Consumer Price Index (CPI) figures due for release on July 31 could prompt the RBA to hike interest rates.
However, this would be inconsistent with the broader economic indicators and the expected adjustments by other major central banks in response to similar economic trends..