With record job openings, Australia’s unemployment rate now lowest in 48 years

Australia’s unemployment rate dived to a 48-year low in June as hiring outstripped all expectations, while record vacancies suggested the labour market was set to tighten yet further and perhaps justify even larger increases in interest rates.

Figures from the Australian Bureau of Statistics on Thursday showed net employment had surged 88,400 in June from May, when it jumped 60,600. That blew away market forecasts of a 30,000 rise in June and brought gains for the year to a rousing 438,000.

The jobless rate slid to 3.5% from 3.9%, well below forecasts of 3.8% and the lowest since August 1974.

The dive came even as more people went looking for work, with the participation rate climbing to a record high of 66.8%.

The underutilisation rate, which combines unemployment and underemployment, held at its lowest since 1982 at 9.6% and implied that wage growth would accelerate over time.

The number of unemployed also fell by an unusually large 54,300, while layoffs were limited.

“These flows reflect an increasingly tight labour market, with high demand for engaging and retaining workers, as well as ongoing labour shortages,” said Bjorn Jarvis, head of labour statistics at the ABS.

He noted that the number of unemployed people, 494,000, now almost matched the number of vacancies, 480,000. “This equates to around one unemployed person per vacant job, compared with three times as many people before the start of the pandemic,” he said.

With the economy essentially at full employment and inflation running red-hot, the Reserve Bank of Australia (RBA) is considered certain to keep lifting interest rates following last week’s half-point hike to 1.35%.

Markets fully expect another 50 basis points in August, with even some talk of a more drastic move if coming inflation data shocks to the high side, as it has globally.

An eye-watering 9.1% June reading on U.S. consumer prices has investors wagering the Federal Reserve could hike by a full percentage point, while the Bank of Canada on Wednesday stole a march by doing just that.

Australia’s consumer price report for the second quarter is due on July 27, and analysts had already feared inflation would hit its highest since 1990 at around 6.3%, with worse to come before the year ends.

“With the unemployment rate at a 48-year low, surveyed business conditions well above long-run averages, and COVID-related mobility restrictions fully eased, the economy is bumping-up against capacity constraints in many areas,” said Andrew Boak, an economist at Goldman Sachs.

“The Australian economy remains on a path to much higher inflation and interest rates, having entered the tightening cycle with strong momentum.”