The unemployment rate plummeted to 3.5 per cent in June, the lowest rate in 48 years, as Australia’s great job boom continued.
The drop, from 3.9 per cent in May, was much better than economists were expecting, and Deutsche Bank economist Phil O’Donaghoe said it was one of the best labour market reports in Australian history.
“You can never get too carried away with any number, whether it’s positive or negative, but really it is just an extraordinary strong print, really adding to a very, very robust demand story here in Australia,” he told ausbiz television.
Australian Bureau of Statistics head of labour data Bjorn Jarvis said the June figure was the lowest unemployment rate since August 1974, when it was 2.7 per cent and the survey was quarterly.
CommSec senior economist Ryan Felsman called it a “staggering low” and a “remarkable” figure, a sign of an “incredibly tight” labour market, while Nomura economist Alice Cho called it a “stunningly strong” report.
Economists said it would increase pressure on the Reserve Bank to aggressively hike rates, especially given that the RBA didn’t anticipate unemployment falling to about 3.5 per cent until June 2023.
“Accordingly, the policy debate at the August RBA meeting will likely be between a 50 versus 75bp (basis point) hike, and a 100bp hike cannot be ruled out given how other central banks are weighing these risks,” said economist Taylor Nugent.
The number of unemployed people in June fell by 54,300, to 493,900 people.
There were nearly as many job vacancies in June – 480,000 – as there were unemployed people. Before the coronavirus pandemic there were 3.1 unemployed people per job vacancy.
Employment rose sharply by 88,400 people, smashing expectations of a 30,000-strong rise.
The participation rate rose from 66.7 per cent to 66.8 per cent, a record high and 0.9 per cent above pre-pandemic levels.
The unemployment rate fell for both men and women, both by 0.4 per percentage points. The 3.4 per cent unemployment rate for women was the lowest since February 1974, while the 3.6 per cent jobless rate for men was the lowest since May 1976.
Total hours worked decreased slightly, which economists said was likely due to a high number of COVID-19 and influenza cases. Absenteeism due to illness was at the second-highest level on record.
Full-time jobs have now increased for eight straight months and AMP chief economist Shane Oliver said he expects the unemployment rate would likely fall further, to about 3.2 per cent in the next three to six months.
“Thereafter it’s likely to start rising again, reflecting the lagged impact of rising interest rates and falling real incomes on economic growth and hence labour demand,” Dr Oliver wrote in a research note.
But he said while a 48-year low in the unemployment rate was obviously good news, the comparison to 1974 “is not necessarily a good omen, as after that we slid into a bad bout of stagflation”.
“Of course, many of the circumstances are different today, but the 1970s experience highlights the need for the RBA to act quickly,” Dr Oliver said.
© AAP 2022
