Australia’s Employment Figures Show Unexpected Decrease in July

While the unemployment rate increased, a sign the labor market may finally be relaxing, employment in Australia surprisingly decreased in July, after two months of extremely robust growth.

The Reserve Bank of Australia (RBA) may have finished raising interest rates as a result of the worse report, which caused the local currency to drop to nine-month lows at $0.6366.

According to data released by the Australian Bureau of Statistics (ABS) on Thursday, net employment decreased in July compared to June by 14,600, reverting some of June’s 31,600 increase and defying market expectations of a 15,000 increase. There were 24,200 fewer full-time jobs overall due to all the losses.

The unemployment rate increased from 3.5% to 3.7%, above analyst expectations of 3.6% and reaching its highest level since April.

The ABS issued a warning, stating that the timing of the school breaks in July was likely a factor and may have artificially lowered the data.

On the surface, the report appeared to confirm the RBA’s claim that the market had reached a “turning point,” which should help to reduce inflationary pressures.

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Strong Labor Market Defies Interest Rate Increases

Investors believe the central bank may have stopped tightening after pausing rate increases for the past two months. Futures only predict a 50% chance of one another quarter-point increase to 4.35% by year’s end.

 With 399,000 net jobs added in the year ending in July, the labor market has proven to be extremely durable despite interest rates rising 400 basis points to a decade-high of 4.1%.

Although not nearly as significantly as in some other affluent countries, wages have increased as a result of the strong demand for workers.

According to data released this week, annual salary growth actually slowed somewhat in the June quarter to 3.6%, considerably below the 6% inflation rate, indicating there is currently little risk of a price wage spiral developing.

Experts predict that the current quarter will be stronger due to an increase in minimum wage awards, but yearly growth will probably still only reach a maximum of 4% at best.

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Source: Reuters