(Bloomberg) -- Australia’s labor market continued to defy gravity in July, adding almost three times the forecast number of jobs, while unemployment remained unchanged as the labor force swelled further.

Key Insights:

  • Job gains were led by Queensland, New South Wales and Victoria; the underemployment and underutilization rates both increased 0.2 percentage point to 8.4% and 13.6% respectively
  • Australia’s labor market has held up surprisingly well even as the economy slowed sharply since mid-2018. One explanation is that much of the hiring is from government-related programs that are impervious to prevailing economic conditions
  • The central bank executed its first back-to-back interest-rate cuts in seven years in June and July as it redoubles efforts to drive unemployment down toward 4.5%, the bank’s new estimate of the rate needed to reignite inflation
  • In lowering the level seen as full employment, Reserve Bank Governor Philip Lowe is following in the footsteps of other developed-world counterparts, who’ve had to wait for their jobless rates to fall to exceptionally low levels to spur wage growth
  • Money markets are predicting further reductions from the current 1% cash rate; indeed the RBA, in its quarterly update of economic forecasts released Friday, used market pricing for a further two cuts -- to 0.5% -- as the basis for its growth and inflation estimates
  • Pushing Australia’s jobless rate down to 4.5% is likely to prove an uphill battle. The nation’s debt-laden households have hunkered down and cut spending as they grapple with stagnant incomes, and weakening house prices erode their wealth

Market Reaction

  • The Aussie dollar rose to 67.72 U.S. cents at 11:49 a.m. in Sydney from 67.58 pre-data; it climbed as high as 67.88 on the report

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke, Victoria Batchelor

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