Employment Surges by 58,000 in Tight Australian Job Market

Highlights:

• Strong Job Growth: Australia added 58,000 jobs in July, surpassing market expectations and reflecting a resilient labor market.
• Rising Unemployment Rate: Despite job gains, the unemployment rate increased slightly to 4.2%, driven by a record-high labor force participation rate of 67.1%.
• Government-Led Employment: A significant portion of job growth over the past year was in publicly funded sectors, while private sector hiring has slowed.

Labor Market Resilience Amid Economic Cooling

Australia’s labor market continues to show resilience, even as the economy cools rapidly. In July, about 58,000 people gained employment, surpassing market expectations of 20,000, according to the Australian Bureau of Statistics (ABS). Despite this growth, the unemployment rate inched up to 4.2% from 4.1% in June. The record-high labor force participation rate of 67.1%—fueled by increased migration—reflects the strength of the job market, with more Australians either employed or actively seeking work.

Implications for RBA’s Interest Rate Strategy

The Reserve Bank of Australia (RBA) faces continued pressure to maintain high interest rates due to the strong labor market. Although the jobless rate has risen, the influx of new workers is absorbing much of the employment opportunities, preventing a more significant spike in unemployment. AMP Deputy Chief Economist Diana Mousina notes that the rise in unemployment isn’t alarming enough to prompt an imminent interest rate cut by the RBA. Similarly, Betashares Chief Economist David Bassanese suggests that the current labor market dynamics align with the RBA’s goal of balancing unemployment and inflation.

Government-Driven Employment Growth

Interestingly, the bulk of recent job creation has been driven by state and federal governments. Of the 360,000 new jobs added in the year leading up to May 2024, nearly half were in publicly funded sectors like health, education, and government administration. Meanwhile, private sector hiring has decelerated, with only 39% of employers recruiting in June—the lowest since the COVID-19 lockdowns. Although job openings have declined by a quarter since mid-2022, they remain higher than pre-pandemic levels.

As the economy slows, the RBA anticipates a gradual rise in the unemployment rate, while Treasury projects it will reach 4.5% by mid-2025.

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