Australia’s July Job Figures Surprise with Unexpected Decline Amid Easing Labour Market

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In an unexpected turn of events, Australia’s employment sector witnessed an unforeseen decline in July, halting two months of robust growth.

Contrary to a predicted 15,000 job increase, ABS data showed a drop of 14,600 jobs in July from June, mainly due to a decrease of 24,200 full-time positions. Simultaneously, the jobless rate rose marginally from 3.5% to 3.7%, exceeding predictions and hitting a peak since April.

“Today’s data are likely to be the final nail in the coffin for any lingering expectations of a rate hike in September,” said Ben Udy, lead economist for Oxford Economics Australia. “Even so, the deterioration in the labour market has a long way to run before the RBA can completely relax.”

Despite potential distortion from July’s school holidays, the report supports the Reserve Bank of Australia’s (RBA) stance on an approaching market “turning point,” which could help ease inflationary pressures.

The RBA, having suspended rate hikes for the past two months, has led to speculations that its tightening cycle might be concluding. Futures market data indicates only a 50-50 chance of a quarter-point hike to 4.35% by year-end.

Australia’s job market remained robust despite the setback, adding 399,000 net jobs in the past year alongside a rise of 400 basis points in interest rates to a decade-high of 4.1%.

However, wage growth stayed modest at 3.6% annually in the June quarter, significantly below the 6% inflation rate. Analysts predict a likely recovery next quarter due to increased minimum wage awards, yet they still foresee annual growth peaking at a manageable 4%.

“We need to have an open mind to the idea there has been a significant change in wage/price-setting behaviour and that wage inflation will peak at a lower rate than was initially anticipated.” Westpac senior economist Justin Smirk said.

As Australia’s labour market faces uncertainties, economists and policymakers monitor its trajectory closely.

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