In a surprising twist, Australia’s employment data for June 2025 has delivered a mixed bag of results, with the number of jobs rising by 2,000, but the unemployment rate unexpectedly jumping to 4.3%.
This comes as a shock to the market, which had anticipated a stable jobless rate of 4.1%. The disappointing jobless figure sent the Australian dollar into a sharp decline, further fueling speculation that the Reserve Bank of Australia (RBA) may be forced to cut interest rates in its next meeting in August.
According to the latest data from the Australian Bureau of Statistics (ABS), while employment rose by a modest 2,000 positions, the increase in unemployment came as 33,600 workers lost their jobs in June. The rise in the unemployment rate has caught many off guard, especially as experts had predicted a net gain of 20,000 jobs for the month.
The unexpected rise in unemployment has sent shockwaves through the financial markets. The Australian dollar plummeted below 65 US cents following the announcement, and market analysts are now predicting a 100% chance of a rate cut from the RBA in August.
Key Factors Behind the Unexpected Employment Data:
- Underemployment on the Rise: Despite the modest increase in jobs, the underemployment rate saw an uptick to 6%. This was driven by the creation of 40,200 part-time roles, while 38,200 full-time positions were lost. The disparity between part-time and full-time job creation is a key indicator of ongoing weaknesses in the labour market.
- Slower Growth in Working Hours: The number of hours worked fell by 0.9% in June, following a significant 1.4% rise in May. This slowdown in hours worked could be a signal of weakening economic conditions.
- Market Reactions: Following the news, market analysts quickly revised their forecasts, with many predicting a near certainty of a rate cut in August. Tony Sycamore, an analyst at IG Markets, noted that the RBA’s previous forecast of 4.2% unemployment for June has now been surpassed, calling into question its strategy of prioritizing inflation control over job growth.
- RBA’s Dilemma: The RBA has been balancing its dual mandate of controlling inflation while promoting full employment. With inflation back within its target band, the RBA may be more inclined to act on the softening job market and implement a rate cut to stimulate economic activity and job creation.
Implications for Australia’s Economic Future:
The latest jobs data suggests that Australia’s labour market is showing signs of cooling. Economists like David Bassanese from Betashares believe that the June report makes a strong case for an August rate cut, but he also cautions that the labour market will need more consistent signs of weakness before a broader shift can be confirmed.
The RBA will be closely monitoring the situation, as it faces increasing pressure to act in response to slower economic growth and rising unemployment. While inflation is under control, the job market remains a critical issue for the central bank, which will likely be forced to choose between supporting growth or keeping inflation in check.
With the Australian dollar weakening, many analysts predict that this could have long-term effects on the economy, particularly in areas like trade and investment. For now, Australians can expect the ongoing uncertainty in the labour market to continue shaping the country’s economic landscape for the months to come.
