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  • Writer's pictureCrest Economics

Rising spare capacity: Australia's unemployment hits 4% - June 2024

Australia's job market is showing signs of vigorous health, with the unemployment rate dropping to 4% in May from 4.1% in April.  The decline is particularly noteworthy given the backdrop of the economy's recent sluggishness, with economic growth falling to 1.3% in June 2024. According to the latest ABS data, the number of jobs increased by 39,700 during the month, surpassing expectations and primarily bolstered by a rise in full-time employment by 41,700 positions, indicating stronger job security and better benefits for workers.

Yet, it's not all rosy. Despite the headline unemployment rate drop, the underemployment rate lingers at about 8.3%, indicating that many are still in search of more work hours. May labor force report suggests that, in line with persistent weakness in economic output, labor demand is slowly but surely losing its ability to absorb the immigration fueled gains in labor supply. Overall employment growth remains robust, but the unemployment rate has gradually moved a little higher over the past year from the historic lows of 3.5% in August 2022.

The RBA might find itself walking a tightrope, balancing between nurturing economic growth and managing inflation risks. Historical trends suggest that when unemployment rates hover around 4%, the RBA has leaned towards tightening monetary policy to prevent the economy from overheating.

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