Australia fully employed as jobs bounced back in August

Cafe manager Rhyss Kearns serves customers at Bay Ten Espresso, a cafe that has struggled with filling staff job openings in recent months due to a worker shortage according to its owner, in Sydney, Australia, August 31, 2022. REUTERS/Loren Elliott/File Photo

SYDNEY  -Australian employment bounced back in August after a surprise dip the month before and the jobless rate edged up just a tick from a 48-year low, underlining the resilience of the labor market in the face of rising interest rates.

Figures from the Australian Bureau of Statistics on Thursday showed net employment rose 33,500 in August, in line with market forecasts and mostly reversing a 41,000 fall in July.

The jobless rate inched up to 3.5 percent, from 3.4 percent, but only because more people went looking for work. It remained comfortably below most estimates of full employment.

Full-time employment climbed a solid 58,800, while total job gains for the 12 months to August were a huge 570,300.

Hours worked also firmed in August, by 0.8 percent, though the ABS noted COVID-19 was still disrupting work, with the number of people on sick leave double the normal number at 760,000.

The outlook for labor demand is also robust, with the ABS estimating there were 480,500 unfilled vacancies in June, meaning there was one opening for every person unemployed.

Before the pandemic hit, there were more than three unemployed people for every vacancy.

It was also notable that a well-respected NAB survey of businesses out this week showed activity actually picked up in August from already strong levels, while costs pressures eased only slightly.

Such resilience suggests the Reserve Bank of Australia (RBA) will keep on raising interest rates, with the only question being whether it does another half-point in October or steps down to quarter-point moves.

The RBA has already hiked by 225 basis points since May, to 2.35 percent, and futures imply rates could reach as high as 3.85 percent by the middle of next year.

The market is leaning toward 25 basis points next month, since RBA Governor Philip Lowe opened the door to slowing the pace of hikes, in part because wage growth in Australia is running at half the pace of the United States or Britain.

Yet so hot was the U.S. inflation reading for August this week that investors wondered whether the RBA might still need to hike aggressively just to keep up with the Federal Reserve.

“We think the RBA will put more emphasis on domestic factors and the slowdown in momentum in the labor market points to a smaller 25bp hike,” argued Marcel Thieliant, a senior economist at Capital Economics.