The Australian Bureau of Statistics (ABS) has revealed its latest labour force statistics for July, indicating a slight uptick in Australia’s unemployment rate to 3.7 per cent during the month.
The release of this data has prompted a decline in the Australian dollar, as traders have concerns that this might signal the beginning of the anticipated surge in unemployment, a consequence of the RBA’s interest rate strategy.
In July, the count of unemployed individuals in Australia rose by nearly 40,000. Nevertheless, when viewed on a year-on-year basis, the employment rate remains notably robust.
Year-on-year disparity remains significant
“The fall in employment follows an average monthly increase of around 42,000 people during the first half of this year … employment is still around 387,000 people higher than last July,” ABS Head of Labour Statistics Bjorn Jarvis said.
Mr Jarvis also pointed out that the data might be influenced by the school holiday season in July.
“July includes the school holidays, and we continue to see some changes around when people take their leave and start or leave a job. It’s important to consider this … the only other fall in employment in 2023 was in April, which also included school holidays.”
Will the RBA stop hiking rates?
Matt Simpson, Senior Market Analyst at City Index, expressed confidence that the rise in unemployment solidifies the current peak RBA rate.
“Cracks are finally appearing in the employment data, and that should clear up any doubt over whether the RBA are done hiking,” he said.
“They’re done at 4.1 per cent as far as I’m concerned now, with persistently weak data from China and easing from the PBOC adding to the case of a peak rate.”
Citi anticipates two more hikes
Mr Simpson’s perspective differs from analysts at Citigroup, who anticipate two more hikes to reach a terminal rate of 4.6 per cent.
UBS analysts project the RBA to maintain rates at the next meeting but note the lingering risk of a 25 basis point increase.
Meanwhile, Oxford Economics’ Lead Economist Ben Udy aligns with Matt Simpson’s view that the RBA has concluded its hiking.
However, Mr Udy emphasised that a 3.7 per cent unemployment rate likely falls short of fully satisfying the central bank’s intended goals.
“We already thought the RBA had completed its current hiking cycle with 4.1 per cent marking the peak in rates … today’s data are likely to be the final nail in the coffin for any lingering expectations of a rate hike in September,” he said.
“Even so, the deterioration in the labour market has a long way to run before the RBA can completely relax.”