Investing.com -- Australia’s labor market grew much more than expected in June, data showed on Thursday, likely pointing to more sticky inflation in the country and pressure on the Reserve Bank to keep hiking interest rates.
The total number of employed people in the country grew by 32,600 in June, much higher than forecasts for growth of 17,000 people, data from the Australian Bureau of Statistics (ABS) showed.
The unemployment rate was steady at 3.5%, staying close to near 50-year lows, while the broader labor market remained tight.
The strong jobs data reading saw the Australian dollar shoot up 0.8% in morning trade, as markets bet that strength in the labor market will give the Reserve Bank of Australia (RBA) enough headroom to keep raising interest rates.
A strong labor market is also expected to factor into sticky consumer inflation, which was a key point of contention for the RBA as it hiked rates repeatedly over the past year to curb high inflation.
But while the Australian economy did cool in the wake of the sharp rate hikes, the labor market has remained largely robust, defying broader economic weakness in the country. This was largely driven by a shortage of skilled labor in Australia, which saw local businesses scrambling to fill key positions amidst a shrinking talent pool.
The RBA has also stated that it is looking for weakness in the local jobs market to consider pausing its rate hike cycle. The bank held rates steady earlier this month, citing the need to see how the economy was handling a sharp increase in interest rates over the past year.
But with the strong labor data, and with inflation also remaining well above the RBA’s 2% target, a 25 basis point hike appears more likely in August.
The RBA is also set for a change in leadership this year, after the government named Michele Bullock as the successor to Governor Philip Lowe after the latter's term expires later this year.