Australia's Jobless Rate Climbs to Five-Year High Despite Solid Hiring

Australia's unemployment rate unexpectedly climbed to a five-year high in August, even as the economy posted a solid rebound in hiring, according to data released by the Australian Bureau of Statistics on Thursday.

Net employment rose by 39,500 positions in August, recovering from a decline of 15,800 in July and surpassing market expectations of a 20,000 increase. The gains were driven entirely by part-time roles.

The jobless rate, however, rose to 4.6%, exceeding forecasts that it would hold steady at 4.5%. It was the highest reading since late 2021. The participation rate edged up 0.2 percentage points to 67.1%, as the labour force expanded by 67,700 people.

The bureau noted a higher share of people who had previously been outside the labour force moving into unemployment, which contributed to the rise in the jobless rate.

"Employment growth failed to keep pace with the influx of people into the labour force in August, easing some of the tightness in the labour market," said Oscar Guth, an economist at Oxford Economics Australia. He added that inflation pressures extend beyond the labour market, pointing to oil prices above US$100 a barrel and trimmed mean inflation holding at 3.6% in July. Guth said he expects the central bank to raise rates next week.

The labour force grew 2.1% from a year earlier, while employment rose a slower 1.6%, suggesting a gradual loosening of the labour market. That aligns with the Reserve Bank of Australia's assessment that conditions have eased somewhat but remain tight.

Governor Michele Bullock said this week that an unemployment rate in the 4.5% to 5.0% range could help restrain inflation, indicating that some further rise may be necessary.

The central bank has raised interest rates three times this year to 4.35%, matching a post-pandemic high, yet core inflation remains at 3.6%, above its 2% to 3% target band. Bullock has cautioned that inflation risks are materialising amid the Middle East conflict and a data centre investment boom.

Markets are pricing a 95% probability that the RBA will lift rates a fourth time next Tuesday to 4.6%. The Australian dollar slipped 0.3% to $0.7018, a seven-week low, following steep losses overnight. With oil back above $100 a barrel, traders have sharply repriced the global rate outlook, with Australia's cash rate now seen peaking near 5.0%.