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RBA Indicators Signal Labour Market Adding To Price Pressures


In June, Deputy Governor Bullock spoke about the labour market and pointed out that the NAIRU was estimated to be around 4.5% and thus the current labour market situation is inflationary. The labour market remains “very tight”. Bullock also pointed out four labour market indicators that the RBA is watching closely. Today we got updates for three of them and they suggest little change in the labour market.

  • The unemployment rate was 3.5% in both May and June, thus 1pp below the NAIRU. See MNI Labour Market Still Very Tight, August Hike On Cards for details. An increase in jobs and a drop in the number of unemployed saw it fall to 2 decimal places.
  • The underemployment rate was steady in June at 6.4%, which is 0.4pp above the February low but still 2.1pp below the pre-pandemic January 2020 rate. Full-time employees are working more hours but this trend is less pronounced for part-timers.
Australia unemployment vs underemployment rates %

Source: MNI - Market News/ABS

  • The RBA also looks at the quarterly ratio of vacancies to unemployment. Q2 unemployed rose 0.5% q/q, which was less than Q1, but vacancies fell 2% q/q. The ratio eased further to 83.5 in Q2 from 85.7, off its Q3 2022 peak of 91.9 but it is still significantly higher than pre Covid and signalling that there is just under one vacancy per job seeker.
Australia vacancies -to-unemployment %

Source: MNI - Market News/ABS/Refinitiv

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