Australia’s unemployment rate unchanged at 4.2%, dampening hope of RBA interest rate cut

Australia's economy added more jobs than expected last month as the unemployment rate remained steady, making an early Reserve Bank interest rate cut less likely.

The jobless rate in August was 4.2%, the Australian Bureau of Statistics reported on Thursday. Economists had it expected it to remain in line with the 4.2% reported by the ABS four weeks ago .

Employers added a net 47,500 jobs last month compared with the 26,000 economists had predicted. In July, the economy added 58,200, prior to any revision. Of the added jobs, more than 50,000 were part time, with 3,100 full-time roles shed.

Signs of strength in the jobs market included a 0.4% increase in the number of hours worked to 1.962bn, slightly stronger than the 0.3% rise in employment, said Kate Lamb, ABS head of labour statistics.

"The proportion of people working reduced hours because they were sick continues to be above pre-pandemic levels," Lamb said. "However, the proportion of people working less hours than usual due to economic reasons, such as no work or less work available, is below pre-pandemic levels, which points to continued relative tightness in the labour market."

The participation rate, one measure of the share of the population in work or looking for employment, remained at its record level of 67.1%.

The extra jobs mean the workforce has swollen by more than 1 million positions since the Albanese government came to office in May 2022. The labour market will be a key gauge of whether the economy remains aloft after 13 RBA interest rate hikes, or suffers a hard stall as happened after previous bursts of inflation.

The central bank last week indicated it viewed current conditions to be "above" full employment with jobless rate needing to rise to ensure inflation's retreat continued.

However, most rich nations are now cutting interest rates, including the US Federal Reserve making its first reduction in four years overnight. Weakening employment figures in Australia would be one signal for the RBA to sharpen its rate cut axe.

Prior to today's figures, financial markets were betting the RBA would leave its cash rate unchanged at its two-day board meeting next Monday and Tuesday. Investors were only fully pricing in the first 25 basis point to 4.1% by February, according to the ASX .

After the release of the data, the Australian dollar remained steady near 67.5 US cents, while the ASX200 benchmark share index was also little moved to be flat for the day.

Among the major states, New South Wales saw its jobless rate creep up to 4.1% from 4.0% in July. Queensland, which goes to the polls next month, saw its unemployment rate ease 0.1 percentage points to 4.2%, with Victoria posting a similar improvement to 4.5%.

Western Australia, South Australia and the ACT – which also hold elections soon – posted a jobless rate of 3.9% in August, the lowest in the nation.

More to follow ...