Australia’s unemployment rate rises to highest level since late 2021

Australia's unemployment rate rose to 4.2% in July 2024, marking its highest level since late 2021. This increase comes despite a significant boost in employment, with the Australian Bureau of Statistics (ABS) reporting the creation of 58,200 jobs over the month.

The rise in the unemployment rate, up from 4.1% in June, is primarily attributed to a record labour force participation rate of 67.1%, up from 66.9% the previous month. This means more people are actively seeking work, contributing to the higher unemployment figure. While job creation exceeded economists’ expectations, the influx of job seekers into the market led to a temporary uptick in unemployment.

In detail, full-time employment saw a notable increase of 60,500 jobs, significantly contributing to the overall employment growth. Despite the increase in the unemployment rate, the employment-to-population ratio also rose by 0.1 percentage points to 64.3%, indicating that job growth is outpacing population growth.

“Although the unemployment rate increased by 0.1 percentage points in each of the past two months, the record high participation rate and near-record employment-to-population ratio show that there continues to be a high number of people in jobs, and looking for and finding jobs,” the ABS stated in a recent report.

The number of unemployed individuals rose to 637,000, the highest level since November 2021. However, this figure remains approximately 70,000 below pre-pandemic levels, suggesting a relatively resilient labour market.

The ABS noted that the increase in unemployment coincided with a 0.4% rise in seasonally adjusted monthly hours worked, reflecting a healthy demand for labour despite the growing number of job seekers. This could imply that businesses are working their existing employees more hours as they navigate a competitive labour market.

These mixed signals from the labour market will likely impact monetary policy decisions at the Reserve Bank of Australia (RBA). RBA Governor Michele Bullock has raised concerns about persistent inflation, emphasizing that the tight labour market may exacerbate wage pressures. Businesses continue to report difficulties in hiring, further complicating the landscape for wage growth.

In light of these challenges, Bullock has ruled out the possibility of an interest rate cut over the next six months, citing the need to combat inflation that remains stubbornly high. The RBA is tasked with balancing the need for economic growth while managing the complexities of the job market and inflationary pressures.

Overall, the data suggests that while Australia's job market remains tight, the rising unemployment rate highlights the ongoing challenges that workers face in finding jobs amidst a record number of people participating in the labour force. As the economy continues to evolve, the government and RBA will need to closely monitor these trends to ensure sustained economic stability and growth.