Australia’s unemployment rate experienced a notable uptick, reaching 3.7% in July, according to recent data from the Australian Bureau of Statistics (ABS).
This 0.2 percentage point increase highlights a decrease in employment by approximately 15,000 individuals, resulting in a higher unemployment rate.
Bjorn Jarvis, the ABS head of labor statistics, explained, “The rise in the unemployment rate to 3.7% is a result of both the decline in employment and an increase of 36,000 people in the number of unemployed individuals.”
Jarvis further noted that the drop in employment follows an average monthly increase of around 42,000 during the first half of the year. Despite the decrease, employment remains significantly higher, totaling around 387,000 more individuals compared to the previous July.
It’s important to consider the context of school holidays, which may affect when people take leave or transition between jobs. Therefore, a comparison of month-to-month changes against the usual seasonal pattern is crucial. Additionally, the April employment decline, which also occurred during school holidays, underscores this trend.
While unemployment rose by 36,000 individuals in July to a total of 541,000, it’s important to note that this figure is still around 172,000 lower than pre-pandemic levels.
The employment-to-population ratio also experienced a minor decline of 0.2 percentage points, resting at 64.3%. Similarly, the participation rate decreased by 0.1 percentage point, reaching 66.7%.
“Despite these decreases, both indicators remain notably higher than pre-pandemic levels and are close to their historical highs achieved in May,” highlighted Mr. Jarvis.
In terms of employment distribution, full-time employment saw a significant decrease of 24,200 jobs in July, whereas part-time employment witnessed a modest increase of 9,600 positions.
This change in employment numbers could potentially influence the Reserve Bank’s decision to maintain their cautious stance on interest rates. Currently, the likelihood of a rate hike in September stands at less than 10%. Traders responded by driving down the Australian dollar by nearly a quarter of a US cent, resulting in a trading value of approximately 63.75 US cents.
Mr. Jarvis underlined the continuing strength in hours worked, indicating a tight labor market. Hours worked were notably 5.2% higher than in July 2022, surpassing the 2.8% annual increase in employment during the same period.
He further emphasized that the growth in hours worked over the past year, compared to employment growth, suggests that labor demand is being met to some extent by individuals working more hours.
CreditorWatch, Chief Economist, Anneke Thompson said: “On a seasonally adjusted basis, the unemployment rate in Australia climbed by 0.2 percentage points in July, to a still very low 3.7%. The number of unemployed people in Australia climbed by almost 36,000, with almost all of this increase being felt in two states, Queensland and NSW. Given this increase in unemployed people, the unemployment rate in Queensland rose by a substantial 0.8% on a seasonally adjusted basis, to now be 4.5%.
“While this is only one month’s worth of data, and there is no consistent trend seen yet in weakness in the labour force in these two states, CreditorWatch’s Business Risk Index data has consistently highlighted areas in Western Sydney and South-East Queensland as being the most at risk of business failure. These areas have an above-average proportion of workers in casual or insecure work, and businesses that have been in operation for a relatively short period of time, and are therefore much more susceptible to fluctuations in demand.”
Overall, Australia’s unemployment rate remains low by historic standards, but there are clear signs now that more weakness in the labour force can be expected, given the deteriorating economic conditions, led by very weak consumer demand.
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