SYDNEY – Australian employment unexpectedly fell in July and the jobless rate hit its highest point since late 2021, data showed on Aug 20, adding to signs of a cooling labour market and easing pressure for another interest rate hike.
The report sent the Australian dollar down 0.2 per cent to US$0.7111. Markets are pricing in little chance of a rate hike from the Reserve Bank of Australia in September, but a move by the end of 2026 is still viewed as a coin toss, with much riding on inflation outcomes.
Figures from the Australian Bureau of Statistics showed net employment fell 15,800 in July from June when it jumped a revised 80,300. That was compared with a forecast for an increase of 15,000, though full-time jobs did rise by 16,300.
The jobless rate ticked up to 4.5 per cent, above a forecast of 4.4 per cent and running ahead of the RBA’s expectation that it will be at 4.5 per cent by the end of 2026. The monthly jobs data, however, have been volatile and past increases have been revised.
“Today’s data are a touch weaker than the bank had pencilled in and, together with yesterday’s softer wage growth, keep the pressure off the RBA to hike anytime soon,” said Ben Udy, lead economist for Oxford Economics Australia.
The details of the report were on the soft side. The participation rate eased to 66.9 per cent from 67 per cent, hours worked dropped 0.6 per cent and the underemployment rate – a measure of slack in the labour market – held at a two-year high of 6.4 per cent.
The RBA has judged that the labour market has eased a little, one reason that it held policy rates steady at 4.35 per cent last week after three rate increases in 2026. On Aug 19, data showed that wages rose at a moderate pace for a fifth straight quarter.
Policymakers, however, warn that further tightening cannot be ruled out if inflation risks materialise, citing the US-Israeli war on Iran, the global artificial intelligence boom and poor productivity that has restrained the Australian economy’s potential growth rate.
“The bigger risks are coming from offshore,” said Krishna Bhimavarapu, an economist at State Street, adding that bond yields are rising, financial conditions are tightening and an El Nino event might affect Australia’s wheat harvest.
“The risk is that adverse weather becomes an unwelcome inflation shock at a time the economy is under transition, potentially slowing the disinflation process and adding another layer of uncertainty to growth,” he said. REUTERS
