Labour force
Date: Thursday, 20 August at 11.30am AEST
Last month, the June employment report delivered a stronger-than-expected outcome, with employment rising by 76,300, well above the +15,000 consensus forecast. At the same time, the unemployment rate held steady at 4.4%, while the participation rate climbed to 67.0% from 66.7%.
At its Board meeting last week, the RBA noted that ‘labour market conditions have eased by a little more than expected in recent months’, while leading indicators pointed to only limited further easing in the near term.
In the updated forecasts accompanying the decision, the RBA revised its unemployment rate projections higher and now expects the jobless rate to rise to 4.5% by the end of 2026 and peak at 4.8% by mid-2028.
Looking ahead to the July update, the forecast is for a modest increase of around 10,000 jobs, with the unemployment rate expected to hold steady at 4.4%, aided by a small decline in the participation rate to 66.9%.
A softer-than-expected result, particularly a rise in the unemployment rate towards 4.6%, would reinforce the view that the labour market is loosening in line with the RBA’s updated forecasts and raise the prospect of the central bank remaining on hold through year-end.
Conversely, a strong report would keep tightening risks alive ahead of the RBA’s next Board meeting in September.
The Australian rates market starts the week pricing in 4 basis points (bp) of tightening for the September Board meeting, with a cumulative 15 bp of rate hikes priced in before year-end.
