August rate cut in play after weak jobs figures
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More news: The surprise jump in the unemployment rate to 4.3% in June may be enough on its own to convince the Reserve Bank board to cut rates in August.
KPMG chief economist Brendan Rynne said in a statement that the jobs data reinforced the “weakness that is continuing” within the private sector.
While critical quarterly data will be released at the end of the month, Rynne said the jobs figures “even by itself should be enough for the RBA to drop the cash rate at its next meeting”.
He noted the RBA’s own forecasts do not anticipate the jobless rate reaching this level until the end of 2025.
IFM chief economist Alex Joiner said in a post on X that the jobless rate moving to a high not seen since November 2021 "will have many criticizing the RBA for not cutting rates in July".
"This is well above the RBA's expectations for the cycle. Very strong case for an August cut if there wasn't one already. CPI would have to surprise materially on the upside to change this," he said.
Oxford Economics head of economic research and global trade Harry Murphy Cruise said the “slackening” is “another good reason the RBA to get a wriggle on with rate cuts”.
“Looking ahead, the labour market has a number of challenges nipping at its heels,” he said in a statement.
“First and foremost, President Trump’s tariffs are weighing on business investment and prompting some firms to rethink hiring plans. Even though Aussie businesses are largely out of the direct line of tariff fire, global uncertainty is lapping at our shores.”
Unemployment rate rises to 4.3% in June
The news: The unemployment rate jumped sharply to 4.3% in June, defying market expectations for a stable 4.1% result.
The numbers: There was an increase of 34,000 people joining the jobless queue, with employment increasing by 2000 people after a fall of 1000 in May. The consensus was for 20,000 jobs to be created over June.
Part-time employment was up by 40,000 people but there was a fall of 38,000 full time roles.
Hours worked fell 0.9% over June, after a 1.4% lift in May.
Underemployment ticked up 0.1 percentage points to 6%.
The context: Earlier this month, Reserve Bank governor Michele Bullock said at her post-interest rate decision press conference that the central bank's monetary policy board was focused on the labour force figures and the upcoming quarterly inflation data to give them confidence to cut rates.
The strength in the jobs market has been an ongoing source of surprise for the RBA and economists more broadly, who had previously anticipated a greater level of deterioration in the unemployment rate as rates increased. The RBA has been focused on retaining as many jobs as possible while getting inflation firmly back within the 2% to 3% target band and has called its progress on this front a success compared to the global experience.
However, its decision to keep rates on hold at its July meeting shocked the market and has put additional scrutiny on the jobs figures and upcoming inflation data as economists firm up forecasts for the August meeting.
What they said: "This month we saw a decrease in full time hours worked, down 1.3%, associated with a 0.4% fall in full time employees," ABS head of labour statistics Sean Crick said.
The trend data has also started showing a deterioration.
"The trend unemployment rate has risen to 4.2%, after remaining at 4.1% over the previous three months," he said.
The source: Australian Bureau of Statistics media release
