Australia's unemployment rate increased to 4.5% in July, a development that signals a cooling economy and suggests that inflationary pressures may be easing, according to data from the Australian Bureau of Statistics. The figures showed a decline in both employment and hours worked last month, aligning with forecasts made by the Reserve Bank of Australia (RBA) for year-end unemployment.
In July, seasonally adjusted employment fell by 16,000 people, while the number of unemployed individuals rose by 4,000. This contrasts with forecasters who had predicted a rise in employment. The RBA has been monitoring employment levels as a key indicator for its monetary policy decisions. This softening in the labor market is seen as evidence that the RBA's previous interest rate increases are functioning as intended, potentially making further rate hikes unnecessary.
The RBA kept its cash rate steady at 4.35% following its August 11 meeting. Governor Michele Bullock has indicated that the central bank is looking for the labor market to soften to bring inflation back within its target band of 2-3%. The inflation rate for the 12 months to June stood at 3.8%.
Sean Crick, ABS head of labour statistics, noted that employment losses were experienced by both men and women, with men accounting for the larger portion of the decline. Male employment fell by 11,000, comprising a decrease of 10,000 in part-time roles and 1,000 in full-time positions. Female employment saw a smaller overall decline of 5,000, as a gain of 17,000 in full-time positions partially offset a loss of 22,000 in part-time roles.
Total hours worked across the economy also experienced a notable drop in July, decreasing by 12 million hours. Full-time workers accounted for a 7 million hour reduction, while part-time workers contributed 5 million fewer hours. New South Wales and Western Australia were the primary contributors to this decline in hours worked, each down by 8 million hours.
The rise in unemployment, while still relatively low by historical standards, occurs against a backdrop of an Australian economy facing challenges from global factors such as oil price shocks and persistent low productivity growth. RBA Deputy Governor Andrew Hauser recently stated that while the economy is softening, a more significant slowdown is required to meet the RBA's inflation targets.