Economy Strong Enough To Create Work, Some Signs Of Easing In Q2

The June and Q2 jobs data showed that there was only a slight further easing of the labour market and that the economy is strong enough to create almost enough jobs to cover the strong rise in the labour force (see MNI Economy Strong Enough To Absorb Bulk Of Labour Force Entrants). This increases the risk of another rate hike, especially if Q2 CPI prints around 1%q/q on July 31. A number of indicators that the RBA looks at stabilized in Q2 though.

• The unemployment rate rose only 0.1pp to 4% in Q2 from 3.9%, in line with the RBA’s May forecast. Underemployment though was 6.6% unchanged from Q1 and the June result was lower at 6.5%. Both rates were still 0.6pp higher than their cycle troughs, signaling some easing in conditions.
• Underemployment fell in June due to a 0.8% m/m rise in hours worked. Q2 rose 1.6% q/q after 0.2% in Q1, another sign that demand is strong enough to need more labour input.

Source: MNI - Market News/ABS

• The RBA likes to look at the youth unemployment rate, as it is often a lead indicator of other labour market trends. It averaged 9.7% in Q2 up 0.3pp. June fell 0.2pp to 9.5% though, lowest since February, to be 2.3pp higher than the mid-2022 trough, signaling material easing but the level remains historically low.

Source: MNI - Market News/ABS

• Vacancies/unemployment continues to moderate with the ratio falling 4.5pp in Q2 to 58.3%, while it is down 23.8pp over the year it remains over double the average in the 10 years to end 2019.
• The quarterly NAB business survey for Q2 is out on July 25 and includes availability of suitable labour as a severe output constraint. In Q1 it was 22pp below the Q3 2022 peak.