By Shane Wright and Millie Muroi
Unemployment has climbed to a two-and-a-half-year high even after the country added 58,000 new jobs in July, keeping pressure on the Reserve Bank to leave official interest rates steady in a bid to ease economy-wide inflation pressures.
The Australian Bureau of Statistics on Thursday reported unemployment lifted by 0.1 percentage points last month to 4.2 per cent, its highest rate since January 2022. The total number of people looking for work increased by almost 24,000 to 637,100 – the most since October 2021.
The participation rate, which measures those in work or looking for it, rose to a record high of 67.1 per cent.Credit: Louie Douvis
While the unemployment rate increased, the number of people holding down a job rose to a record 14.5 million. Of the 58,000 extra people in work through the month, 48,200 were in NSW while another 26,300 positions were created in Victoria. Queensland shed 25,500 jobs.
The participation rate, which measures those in work or looking for it, rose to a record high of 67.1 per cent.
Before the release of the figures, financial markets put the chance of an interest rate cut at the RBA’s November meeting at 50-50. They now put the chance at one in three.
KPMG chief economist Brendan Rynne warned the strong employment data could reflect businesses clinging on to workers as long as they could.
“In weaker economic conditions, businesses often try to hold on to staff for as long as possible, given Australia’s industrial relations frameworks and the time and cost it takes to hire and then train good staff,” he said.
“It is also possible that the very high participation rate is being partly driven by people from squeezed households, seeing savings depleted and trying to get back into the workforce.”
AMP deputy chief economist Diana Mousina said the data showed people were being matched to jobs or were confident enough to look for one, signalling the labour market was strong enough to absorb an influx of workers.
This made the rise in the unemployment rate “less of a red flag”, she said, and would not push the Reserve Bank to cut rates any time soon.
However, Mousina said job vacancies, job advertisements and hiring intentions – all signs of future trends in employment growth – pointed to a further slowdown in the labour market.
The Reserve Bank, which has warned inflation may take longer to reach its target band of 2 to 3 per cent if the labour market proves stronger than it currently thinks, expects unemployment to climb to 4.3 per cent by Christmas.
EY chief economist Cherelle Murphy said the unemployment rate in July remained below the Reserve Bank’s estimates for full employment – the rate at which it would put upward pressure on inflation.
She said that for the Reserve Bank, the figures showed holding rates steady remained the “most sensible option”.
By region, Victoria’s unemployment rate was steady at 4.6 per cent, while it increased by 0.1 percentage points to 4 per cent in NSW.
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