By James Glynn
The labor market in Australia experienced a significant surge in August as an impressive 64,900 jobs were added to the economy. This unexpected boost has tempered the belief that the Reserve Bank of Australia would hold off on further interest rate hikes.
Additionally, participation in the job market increased during this period. Although more people entered the labor force, the unemployment rate remained steady at 3.7% throughout August, according to the Australian Bureau of Statistics.
This revitalization in employment growth, which encompassed 62,100 part-time positions, marks a turnaround from the recent sluggish period that saw the unemployment rate climb from approximately 3.5% earlier this year.
The Reserve Bank of Australia, in its commitment to closely analyze inflation and jobs data when determining interest rates, will undoubtedly take these encouraging figures into account. Consequently, these numbers will likely strengthen the argument for at least one more rate hike before the year concludes.
Despite the Reserve Bank of Australia implementing a cumulative 400 basis points of rate increases, the labor market remains remarkably tight. Hence, these latest statistics remove any leeway that the RBA may have been hoping for to conclude its rate hiking cycle.
According to Tony Sycamore, an analyst at IG Markets, "It's clear the labor market remains extremely tight despite the 400 basis points of rate hikes the RBA has delivered, and today's set of numbers won't give the RBA the breathing room it might have been hoping for to end its rate hiking cycle."
Employment Growth Surges in August
According to the Australian Bureau of Statistics (ABS), there was a significant increase in employment during the month of August. This rise comes after a slight decline in July, which is common during the school-holiday period.
Over the past two months, average employment growth has been around 32,000 people per month. This figure is comparable to the average growth recorded over the past year, indicating a stable trend in job creation.
In addition to the increase in employment, the participation rate also reached a record high of 67.0% in August. This indicates a higher percentage of the population actively participating in the labor force.
However, despite these positive indicators, monthly hours worked experienced a slight decrease of 0.5% during August. This may be attributed to various factors impacting work schedules and job dynamics.
Another important aspect to consider is the underemployment rate, which rose by 0.2 percentage points to reach 6.6% in August. While this is 0.6 percentage points higher than the same month last year, it still remains significantly lower (2.2 percentage points) than pre-pandemic levels.
Kieran Davies, chief markets economist at Coolabah Capital, noted that the job market continues to be highly competitive, and the unemployment rate remains below the levels preferred by the Reserve Bank of Australia (RBA) in order to alleviate consumer price pressures.
Davies emphasized that the RBA is likely still aiming for an unemployment rate around the mid-4s as an optimal scenario.
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