Australian July Unemployment Rate arrives at 7.5% vs. expected 7.8%

The Australian job report has been released as follows, lifting the Aussie on the better than expected jobs numbers, passing 0.7180.

Aussie jobs data

• Australia July Employment +114.7k s/adj (Reuters poll: +40.0k).
•  Australia July Unemployment rate +7.5 pct, s/adj (Reuters poll: +7.8).
• Australia July Full-Time Employment +43.5k s/adj.
• Australia July Participation Rate +64.7 pct, s/adj (Reuters poll: +64.4 pct).

Australian Bureau of Statistics

Australia's unemployment rate ticked up to a 22-year high of 7.5% in July with a fresh wave of coronavirus infections in the southeastern state of Victoria further threatening the outlook.

Figures from the Australian Bureau of Statistics (ABS) showed employment jumped by 114,700 in July, on top of a hefty 210,800 new jobs the previous month. But the surge was still not enough to meet the ballooning labour supply, with the participation rate rising by 0.6 percentage points to 64.7%.

As a result, unemployment rose from 7.4% in June, marking the highest since November 1998. The number of people out of work, available to work and actively looking for work topped one million for the first time ever, the data showed,

Reuters reports. 

• Australian Bureau of Statistics says jobs recovered by 343,000, hours worked by 5.5% since May.
• ABS says employment remained over half a million people lower than seen in March.

A nice surprise for Aussie bulls

AUD/USD extends gains as uptick in labor force participation lifts Australia’s jobless rate

Westpac analysts, ahead of the release, explained that after a substantial jump in employment in June of 210.8k, the recovery should continue in July at a slower pace.

Westpac and the market expected increases of 40k and 30k respectively. hence, the data has impressed and the Aussie is higher. The Unemployment rate was a surprise as well:

Rising participation should drive unemployment higher from 7.4% to 7.8%, which would be a high since 1998.

AUD/USD implications

Meanwhile, while there has been a surprise in the data here, overall, Australia’s economic recovery will be slowed notably by the Victorian virus resurgence.

Stage 4 restrictions will weigh on the participation rate and leave the unemployment level elevated. 

How much this hurts A$ is an open question, with the RBA consistently pushing back against further easing steps such as negative interest rates. China’s industrial sector rebound also continues to underpin Australia’s resources-driven trade surpluses,

analysts at Westpac argued.

The AUD is the commodity currency which means it is bearing the biggest risk of a correction in the case of further escalation in US-China tensions...

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