Unemployment rate remained at 3.5 per cent fuelling rate rise speculation

The chance of another rate rise when the Reserve Bank meets in less than two weeks is looking increasingly likely.

The unemployment rate remained at 3.5 per cent in June (seasonally adjusted), in line with the updated figure for May, according to the latest data released by the Australian Bureau of Statistics (ABS).

Their latest jobs figures showed 32,600 people found work in June — double the consensus expectation for 15,000 jobs

Markets are now suggesting there is a 56 per cent chance the RBA will increase the cash rate to 4.35 per cent, up from the 36 per cent before the jobs data was released.

Bjorn Jarvis, Head of Labour Statistics at ABS said:

"With employment increasing by around 33,000 people and the number of unemployed decreasing by 11,000 people, the unemployment rate remained at 3.5 per cent.

The rise in employment in June saw the employment-to-population ratio remain at a record high of 64.5 per cent, reflecting a tight labour market in which employment has recently increased in line with population growth.

In addition to over a million more employed people than before the pandemic, a much higher share of the population is employed. In June 2023, 64.5 per cent of people 15 years or older were employed, an increase of 2.1 percentage points since March 2020.”

The new ABS data revealed that the participation rate fell 0.1 percentage point to 66.8 per cent from last month’s record high.

It fell 0.2 percentage points for women, to 62.5 per cent, and rose 0.1 percentage point to 71.3 per cent for men.

Monthly hours worked increased

According to the latest ABS figures, monthly hours worked increased by 0.3 per cent in June 2023, which was again faster than the growth in employment (0.2 per cent).

Mr Jarvis commented:

“Over the past 12 months, hours worked increased 4.7 per cent, outpacing the 3.0 per cent increase in employment.

The strength in hours worked since late 2022, relative to employment growth, shows the demand for labour is continuing to be met, to some extent, by people working more hours.

Consistent with the stronger growth in hours worked, full-time employment has increased by 380,000 people over the past year, while part-time employment increased by 30,000."

Meanwhile, the underemployment rate remained at 6.4 per cent, following a 0.3 percentage points rise in May.

And the underutilisation rate, which combines the unemployment and underemployment rates, fell 0.1 percentage point to 9.9 per cent.

The unemployment trend rate remained low

The latest ABS data showed that the trend unemployment rate remained low at 3.5 per cent for the eleventh month in a row.

Employment grew by 39,000 (0.3 per cent) in June and the employment-to-population ratio remained high at 64.5 per cent.

Hours worked increased faster than employment in trend terms (0.5 per cent and 0.3 per cent).

The proportion of people working full-time rose to 70.2 per cent, its highest level since December 2012 and 2.0 percentage points higher than before the pandemic.

Mr Jarvis explained:

“The rapid rise in full-time employment has been particularly pronounced for women, rising from 54.2 per cent of employed women just before the pandemic to 57.9 per cent in June 2023 – the highest it has been since 1994.

This compares to a more modest increase in the share of employed men working full-time, which increased from 80.9 per cent before the pandemic to around 81.5 per cent in June, around where it was in 2018."

Meanwhile, the participation rate remained at 66.8 per cent. The female participation rate rose to a record high of 62.6 per cent.

The underemployment rate rose by less than 0.1 percentage point to 6.4 per cent.

What about the surge in our population?

Tapas Strickland, CFA, Head of Market Economics at NAB commented:

The unemployment rate fell one tenth to 3.5% (3.4666% unrounded, yes that is three 6s) and has averaged 3.5% since July 2022, having only moved lower in October 2022 to 3.4%.

The recent RBA July Minutes had a lot of discussion around the risk that output growth slows more than expected, and if that were to occur “the unemployment rate would be likely to rise beyond the rate required to ensure inflation returns to target in a reasonable timeframe”.

That risk is not being borne out today.

Population growth has surged as the number of temporary visa holders in the country has rapidly rebuilt and migrant inflows have resumed, but labour demand has been more than sufficient to absorb these higher population flows.

The 15+ population shows growth of 590k, or 2.8%, over the past 12 months.

The May budget forecast total population growth of ‘just’ 2.0% over 2022/23, and today’s data clearly shows that this will be exceeded.

The civilian population is now just 75k below a pre-pandemic trend, with almost 80% of the shortfall recovered as temporary visa holders have returned.

About Joseph Ballota Joseph is a Property Coach who put hundreds of people on the road towards wiping away their mortgage in under 5 years through expert Property Investment Plans.