The July jobs data, revealing a surge in unemployment and a decline in new job creation, is poised to be seized upon by market observers with a penchant for interpreting every hint of weak data as a precursor to recession.
Undoubtedly, some of these individuals will employ the July jobs report as evidence of an impending recession and widespread job losses. This is especially the case as the Reserve Bank appears increasingly anxious, perhaps even guilty, that its numerous interest rate hikes may have pushed the job market to the brink.
According to the Australian Bureau of Statistics, July witnessed the unemployment rate climb to 3.75%, accompanied by a rise of 35,600 in unemployed individuals and a decrease of 14,600 in the employed population.
However, this is not the first occurrence in 2023 where pessimists have pounced on the opportunity to proclaim doom when the Australian Bureau of Statistics has documented a rise in unemployment following a decrease in job numbers and an increase in the unemployed count.
Similar circumstances emerged in January, when the ABS indicated that the start of the year and the transition between jobs during school holidays led to an influx of people awaiting new employment opportunities. Consequently, the unemployment rate reached 3.7%.
A parallel situation unfolded during the April holidays, resulting in a jobless rate of 3.7%.
In the current scenario, July's escalation of the jobless rate from 3.5% in June, a reduction of nearly 15,000 individuals employed, and a surge of almost 36,000 in the unemployed count, has triggered cries of alarm from the pessimists.
Reflecting on January's experience, the ABS anticipated that the substantial fluctuations in employment—a decline of 11,500 followed by an increase of 21,900 in unemployment—would be rectified in February. And indeed, February witnessed a surge of 64,600 new jobs and a decrease of over 16,500 in the number of unemployed individuals. This led the unemployment rate, which had reached 3.7% in January, to drop to 3.5% in February.
Similarly, April saw a drop of 4,300 in the employed population and a rise of 18,400 in the number of unemployed. In May, the ABS reported an impressive increase of 75,900 employed individuals and a decline of 16,500 in the unemployed cohort. Subsequently, May's jobless rate retreated from 3.7% in April to 3.6%.
Bjorn Jarvis, the head of labour statistics at the ABS, noted that the irregularities observed in July could be attributed to the school holidays and shifting patterns in leave-taking and job transitions. He advised caution when assessing month-to-month variations, as they deviate from the usual seasonal pattern. Notably, the only other employment decline in 2023 occurred in April, which was also affected by school holidays.
Given these fluctuations, it is wise not to succumb to panic and await the August labour market report for a clearer perspective. Should the employment numbers fail to rebound significantly from July's setbacks, it might suggest a downturn in the labour market, potentially impacting the likelihood of future interest rate hikes (and even a belated rate cut).
The ABS indicated that the employment-to-population ratio decreased by 0.2 percentage points to 64.3%, while the participation rate saw a 0.1 percentage point decline to 66.7%.
In terms of working hours, July witnessed a marginal increase of 0.2%, with the total hours worked reaching 1.952 million, compared to June's 1.948 million (still notably below the peak of 1.981 million in April). Despite a 0.1% fall in the employed population, July saw more individuals working longer hours.
