WA unemployment rate falls in June

Western Australia’s seasonally adjusted unemployment rate fell back 0.1 per cent in June to 3.6 per cent, as the national figure held steady at 3.5 per cent despite an employment uptick.

WA’s unemployment dip clawed back the 0.1 per cent increase it recorded in May, with its 68.2 per cent workforce participation rate the highest of all states but lower than both Australian territories.

In trend terms WA’s unemployment rate was steady at 3.6 per cent.

The national rate also remained steady despite a slight increase in the number of employed people, with 33,000 Australians joining the workforce and the number of unemployed people down 11,000.

“The rise in employment in June saw the employment-to-population ratio remain at a record high 64.5 per cent, reflecting a tight labour market in which employment has recently increased in line with population growth,” ABS head of labour statistics Bjorn Jarvis said.

Tightness in the labour market was cited in the Reserve Bank of Australia’s monetary policy decision statement earlier this month, when it noted firms had reported that labour shortages had lessened though job vacancies and advertisements remained high.

Low unemployment can be used as an indicator of high underlying inflation, and today’s figure will likely factor into the RBA’s August cash rate decision.

Mr Jarvis noted that the proportion of the overall population with a job had increased significantly from the height of the pandemic in 2020.  

“In addition to there being over a million more employed people than before the pandemic, a much higher share of the population is employed,” he said

“In June 2023, 64.5 per cent of people 15 years or older were employed, an increase of 2.1 percentage points since March 2020.”

New South Wales once again recorded the lowest unemployment rate of the Australian jurisdictions, with its seasonally adjusted figure dipping by 0.1 per cent to 2.9 per cent.

It was the first time the nation’s most populous state fell below 3 per cent unemployment, with almost 4.4 million people currently employed there.

South Australia was the only jurisdiction above 4 per cent, with its rate increasing by 0.2 per cent to 4.2 per cent.

The number of hours worked nationally increased at a rate faster than unemployment growth, which Mr Jarvis said suggesting the existing workforce is doing more to bridge the labour shortage gap.

“Over the past 12 months, hours worked increased 4.7 per cent, outpacing the 3 per cent increase in employment,” he said.

“The strength in hours worked since late 2022, relative to employment growth, shows the demand for labour is continuing to be met, to some extent by people working more hours.

“Consistent with stronger growth in hours worked, full-time employment has increased by 380,000 people over the past year, while part time employment increased by 30,000.”

Speaking on today's results, CommBank economist Harry Ottley said volatility in seasonally adjusted figures this year had led the bank to observe trend figures, which painted a picture of a resilient labour market despite slowing economic activity headwinds. 

Mr Ottley said a net increase in jobs was expected to keep up with the nation's high rate of immigration, with trend employment growth meeting the threshold set by population growth.

"Consequently, trend unemployment is moving sideways (3.5 per cent since August 2022)," he said in a note on today's figures.

"Trend underemployment, however, is ticking higher. This could indicate that cost of living pressures are incentivising employees to seek out more hours from their employer."

Mr Ottley said it believed unemployment would rise this year, but said he had expected more softening by now. The bank forecast a 25-basis point increase to the cash rate at the Reserve Bank's August meeting.

"We feel this will be the final hike of this cycle, meaning a terminal rate of 4.35 per cent," he said. 

A note by HSBC Australia and New Zealand chief economist Paul Bloxham and economist Jamie Culling said the bank also expected the employment market to loosen in the second half of 2023. 

"The forward-looking indicators of both labour demand and supply suggest loosening is likely," it said.

"Economic activity has slowed, and job vacancies have declined in the past two quarters.

"Likewise, the boost to labour supply from the reopened international border should continue to help loosen the jobs market from the supply side."

HSBC also expects a 25 basis point rise in August, with CPI data released next week to firm its view. 

"With inflation expected to still be well above the RBA's target, and the labour market still tight, we see the argument for a hike as likely to be stronger than the argument for a hold in August," the pair said.