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Jobs growth in Australia was solid for July but a rise in the participation rate meant the unemployment figure rose to 4.2 per cent, the latest ABS figures reveal.
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Unemployment rises to highest level since November 2021
16 August 2024
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The latest unemployment rate has risen 0.1 percentage points to 4.2 per cent, according to data released for July by the Australian Bureau of Statistics.
ABS head of labour statistics Rebecca Lamb noted that the number of unemployed people grew by 24,000, while the employed number of people grew by 58,000.
"This combined increase lifted the participation rate to a record high of 67.1 per cent," Lamb said.
The employment-to-population ratio rose 0.1 per cent to 64.3 per cent, indicating that employment growth was faster than population growth. It was just below the historical high of 64.4 per cent in November 2023.
“Although the unemployment rate increased by 0.1 percentage point in each of the past two months, the record high participation rate and near record high employment-to-population ratio shows that there continues to be a high number of people in jobs, and looking for and finding jobs," Lamb said.
“While unemployment increased to 637,000 people in July, the highest since November 2021, it remains around 70,000 people below its pre-pandemic level."
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AMP deputy chief economist Diana Mousina said jobs growth surprised higher again in July, with economists expecting only a 20,000 increase.
"The pace of jobs growth has actually lifted in the past few months, and annual employment growth is up by 3.2 per cent over the past year, which is strong," Mousina said.
The rise in the unemployment rate was also unexpected, with economists expecting it to remain unchanged at 4.1 per cent.
Mousina said the latest figures indicate that the labour market is still strong enough to absorb a large number of workers looking for jobs, which means that the rise in unemployment is less of a red flag.
"The RBA’s list of full employment indicators show that the labour market is loosening, with the forward looking indicators unravelling the fastest compared to other indicators, but from very tight levels in 2022," she said.
"The RBA seems to be placing a bit more weight on labour market indicators like the unemployment rate and underutilisation which we think are backward-looking. The RBA expects the unemployment rate to reach 4.3 per cent by the end of the year, while we think it will get to 4.5 per cent."
BDO economics partner Anders Magnusson said while there has been some easing in the labour market since its peak in October 2022, the latest figures indicate that it remains tight.
"While maintaining a tight labour market akin to full employment is a positive outcome, the current interplay between wages and productivity is concerning," Magnusson said.
Magnusson said unless Australians can solve the productivity puzzle and produce more with less, a tight labour market and strong public demand, compounded by higher service wages, will prevent inflation and the cash rate from decreasing anytime soon.
"Higher productivity leads to increased output and benefits employees through real wage growth, but productivity growth has been relatively flat lately. The latest ABS data reveals a 4.1 per cent growth in annual wage to the June quarter, driven by scheduled public sector wage increases," he said.
"While a tight labour market has led to higher wages, these benefits won’t be sustained unless productivity growth catches up and inflation continues to fall.
"Productivity growth ‘grows the pie’ and that enables sustained increases in wages. A key opportunity to improve productivity is in better utilising cohorts in the working age population, such as underemployed people and migrants."
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