August interest rate cut all but locked in after unemployment rises to 4.3 per cent in June, surpassing market expectations
Fresh data from the Australian Bureau of Statistics showed the unemployment rate rose 0.2 per cent to 4.3 per cent after it sat near historic lows following the pandemic.
Employment rose by 2,000 people this month with part-time employment up 40,000, which was offset by a 38,000 person decline in full-time employment.
The unemployment rate is a critical piece of data for the RBA's cash rate decision.
This jump has boosted chances of a rate cut when the central bank next meets in August, with money markets now forecasting an 87 per cent chance of a cut, up from a 77 per cent chance before the call.
KPMG's chief economist Brendan Rynne said the latest data showed the private market continued to struggle with poor business conditions in Australia and heaped pressure on the central bank to cut rates.
'While quarterly inflation data is still a week or so away, today's data will reinforce the weakness that is continuing within the private side of the Australian economy, and even by itself should be enough for the RBA to drop the cash rate at its next meeting,' Mr Rynne said.
Similarly, Capital Economics senior APAC economist Abhijit Surya called into question the RBA's recent rate hold after the new unemployment data was released.
'The sharp rise in unemployment in June makes the RBA's decision to leave rates on hold earlier this month look like a policy error,' Mr Surya said.
'We're increasingly convinced that the incoming data flow will prompt the Bank to cut rates further than most are currently anticipating.'
Sky News' Business Editor Ross Greenwood said the employment slump comes as public sector employment booms over the past few years, with Labor now wanting the private sector to pick up the slack.
'If the government starts to drop out of employing public servants and employing other people associated with government policy - childcare, age care, the NDIS - then you start to see that the private sector is not fast enough in picking up those employees,' Greenwood said.
'I get a sense that that's what we're seeing right now.'
Greenwood said the jump in June was, in part, due to many part-time and full-time jobs going as work required for the recent election in May was phased out.
'The Federal Election sees significant numbers of people employed, not just through the Australian Electoral Commission, but through the political parties themselves,' he said.
Monthly hours worked fell about 1.3 per cent as there was a 0.4 per cent drop in the number of full time employees.
ABS head of labour statistics Sean Crick said the unemployment jump was driven by a 34,000 increase in the number of unemployed people.
If the RBA is to cut rates in August, it will be the third rate cut this year and will bring the cash rate down to 3.6 per cent.
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