Australia’s Labor Market Growth in July

Australia’s labor market grew significantly in July, defying expectations for a softer market amid strong job openings and record-high participation rates.

According to data from the Australian Bureau of Statistics released on Thursday, the total number of employed individuals increased by 58,238 in July. This was substantially higher than the anticipated increase of 20,200 and surpassed last month’s growth of 50,200.

Although the unemployment rate unexpectedly rose to 4.2%, the participation rate surged to a record high of 67.1%, contrary to predictions that it would remain steady at 66.9%.

The robustness of the labor market influences expectations of tighter monetary policy in Australia, especially as inflation remains elevated. Over the past year, a strong labor market has played a significant role in driving consumer inflation.

This trend provides the Reserve Bank of Australia with more flexibility to maintain higher interest rates for an extended period or even consider further hikes, as warned by Governor Michele Bullock last week.

Kate Lamb, ABS head of labor statistics, noted, “The employment and participation measures remain historically high while unemployment and underemployment measures remain historically low compared to what we observed before the pandemic. This suggests the labor market remains quite tight.”