Australia’s Unemployment Rate rises to 4.2% in July vs. 4.1% expected

Lallalit Srijandorn FXStreet

Australia’s Unemployment Rate rose to 4.2% in July, compared with the expectations and the previous figure of 4.1%, according to the official data released by the Australian Bureau of Statistics (ABS) on Thursday.

Furthermore, the Australian Employment Change arrived at 58.2K in July from 50.2K in June, compared with the consensus forecast of 20.0K.

The participation rate in Australia increased to 67.1% in July, compared to 66.9% in June. Meanwhile, Full-Time Employment increased by 60.5K in the same period from 43.3K in the previous reading. The Part-Time Employment decreased by 2.3K in July versus 6.8K prior.

AUD/USD reaction to the Australia Employment report

The Australian Dollar edges higher in an immediate reaction to the mixed Australia Employment report. The AUD/USD pair is trading at 0.6595, down 0.06% on the day.

Employment FAQs

How do employment levels affect currencies?

Labor market conditions are a key element in assessing the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels because low labor supply and high demand leads to higher wages.

Why is wage growth important?

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

How much do central banks care about employment?

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given their significance as a gauge of the health of the economy and their direct relationship to inflation.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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