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Australia labor market slack grows as July employment falls
July saw a 15.8k jobs drop, lifting the unemployment rate to 4.5% and leaving wage growth consistent with a disinflationary outlook.
After a July labor force print that disappointed versus June, Australia recorded a 15.8k jobs loss, according to Action Forex. That left average monthly employment growth year to date at 20.8k, above 2025’s 12.6k but below the pace needed to keep the unemployment rate unchanged.
The unemployment rate edged higher to 4.5% in July, up 0.4 percentage points from the start of the year, while hours worked fell 0.6% in the month. The report said slack is forming in the labor market, which is weighing on activity growth but also supporting the disinflation trend.
Action Forex added that hours worked were only up 0.2% year over year, and that the Q2 wage price index improved the inflation outlook. The headline wage price index rose 0.8% in Q2, taking it to 3.2% higher over the year, with private sector wage growth at its weakest since Q4 2021.
The brief also pointed to weaker household confidence measures, including Westpac-MI sentiment where the unemployment index rose above its long-run average in August. It said cost of living pressures remain the main impediment to confidence, even as mortgage holders received a reprieve from the RBA, and referenced Westpac’s view that a cash rate cut would not arrive until next August.