Unemployment holds at 4.4% with surprise June hiring boom

The latest ABS labour force survey released Thursday revealed the country’s unemployment rate remained at 4.4% in June, unchanged from May. 

June’s seasonally adjusted unemployment rate is in line with expectations but tracks above the Reserve Bank’s most recent forecast which had the jobless rate averaging at 4.2% in Q2.  

More than 76,000 new positions were created over the month, with an additional 47,000 part-time roles driving the growth. 

The figures overshot expectations of big four bank economists, who had all forecast employment growth of around 15,000 to 20,000.  

ABS head of labour statistics Sean Crick said part of the stronger-than-usual June outcome reflected people who had been waiting to start jobs in May.

“This represents a stronger June movement than has been observed in recent years,” Mr Crick said. 

“We also continued to see higher numbers of people remaining employed this June, following elevated levels in the recent few months.”

June jobs data suggests Australia's labour market remains relatively tight despite elevated interest rates, softer economic growth, and ongoing concerns about employment conditions.

The rise in the number of employed people more than offset the additional 13,000 who became unemployed in June. 

Combined with the surge in employment, the participation rate rose by 0.3 percentage points to 67%. 

Total hours worked rose 0.2% in June, driven largely by a 1.2% increase in part-time hours worked, while full-time hours remained flat.

Demand for extra hours continues to rise

Despite strong headline figures, broader measures of labour market slack continued to edge higher.

The underemployment rate rose 0.2 percentage points to 6.5% in June, while trend underemployment and underutilisation increased to 6.3% and 10.7%, respectively. 

More than 61% of June’s employment growth also came from part-time work. 

The rise in underemployment, or the number of people who have jobs but want more hours, is one of the indicators economists have been watching closely.

Prior to the release, NAB group chief economist Sally Auld said upward revisions to underemployment in April and May warranted close attention in June's figures.

“We will be watching to see if the uptick in that broader measure of underutilisation extends further into the quarter,” Ms Auld said.

Similarly, Westpac economist Ryan Wells said the corrected figures materially change the interpretation of the recent trend “from broadly sideways to rising materially”.

Mr Wells also said unofficial measures of underemployment had increased sharply in recent months, suggesting labour market slack may be building more broadly.

More Australians are working beyond 55

The participation rate among Australians aged 55 to 64 rose to 70.6% in June, up 0.8 ppt from a year earlier. 

This marks the strongest annual increase of any group, per the ABS. 

The data suggests Australians are delaying retirement or remaining in the workforce for longer as many households continue to grapple with elevated living costs. 

On the other hand, the participation rate among people aged 25 to 34 also climbed to 87.5%, while the overall participation rate remained near record highs. 

RBA faces mixed labour market signals

The figures are unlikely to materially change the RBA's outlook, with stronger hiring offset by signs of increasing spare capacity in the labour market.

Markets were pricing in an August cash rate hike at 19% a day before the jobs data release.

CBA senior economist Ashwin Clarke said the gradual rise in unemployment would not yet be a major concern for the RBA, noting the jobless rate remained below estimates of full employment.

"Leading indicators such as capacity utilisation and job ads continue to point to a gradual trend increase in the unemployment rate over the rest of this year," Mr Clarke said.

While headline employment was significantly stronger than expected, the rise in underemployment suggests some easing in labour market conditions may still be underway.