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Stronger than expected jobs numbers look set to make August's Reserve Bank decision on interest rates a line-ball call, economists say.
Key points:
- Unemployment fell slightly in June, remaining at 3.5 per cent seasonally adjusted
- More than 1 million jobs have been created since the pandemic, exceeding population growth
- Hours worked has increased faster than employment, meaning more Australians are working full-time
Australia's unemployment rate has dipped to 3.5 per cent, with almost 33,000 extra people gaining jobs last month.
Economists were generally tipping the unemployment rate to remain steady in June at 3.6 per cent with the creation of around 15,000 jobs.
However, the Australian Bureau of Statistics seasonally adjusted estimates show that unemployment instead dipped very slightly on a downwardly revised May figure of 3.5 per cent.
Tony Sycamore from IG said financial markets were now pricing in more than a 40 per cent chance of interest rates rising when the RBA board next meets on August 1.
"The hotter-than-expected jobs numbers, which has the unemployment rate edging back towards a 50-year low, despite 400 basis points of rate hikes from the RBA, leave no room whatsoever for an upside surprise in next Wednesday's Q2 [second quarter] CPI [inflation] data," he wrote.
"More so given the RBA's stated concerns around wage growth and inflation."
Mr Sycamore said an inflation reading much above the market forecast of 6.2 per cent for the June quarter, in data to be released next Wednesday, would likely prompt another rate rise.
However, BDO economic research partner Anders Magnusson said the Reserve Bank should instead look favourably on the continued strength in the labour market.
"The RBA's 'narrow path' is widening, as unemployment remains low while inflation continues to fall," he argued.
"The impact of the last few rate rises have not yet taken their full effect, so what happens next for the economy will depend on the RBA's past actions as much as their next one.
"Since the unemployment rate is not increasing, the RBA would be wise to continue to hold the cash rate next month, allowing this gradual and positive trend to run its course."
Longer hours, full-time work hits decade high
The participation rate, or percentage of those aged 15 years or more either in work or looking for it, edged down from May's record high of 66.9 per cent to 66.8, which was another factor keeping unemployment low.
Despite this, ABS head of labour statistics Bjorn Jarvis says more Australians are employed than ever before.
"In addition to there being over a million more employed people than before the pandemic, a much higher share of the population is employed," he observed.
"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."
And those employed people are working longer too, with hours worked rising 4.7 per cent over the past year compared to a 3 per cent increase in the number of people in jobs.
That means a lot more Australians are now working full-time, at 70.2 per cent of those employed, the highest level since December 2012.
"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," Mr Jarvis noted.
"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."
The underemployment rate remained steady at 6.4 per cent, which is the equal highest level since February last year, but well below the levels consistently above 8 per cent seen for years prior to the pandemic.