Jobs data surprises on the upside, rate hike on the cards

Employment jumped by a substantial 76,300 jobs in June, above the market consensus of 15,000 jobs creation, according to the Australian Bureau of Statistics (ABS).

The unemployment rate remained ready at 4.4%.

HSBC chief economist Paul Bloxham questioned if the rise is a more positive shift in the trend or mostly statistical noise, given that most of the other recent survey indicators for the economy show weakening.

"The sharp rise in employment in June, followed two months which had netted to a close to flat result, which has meant that the three-month average and the six-month average for employment are now both running at 27,000 jobs, which is solid job creation and enough to, in a trend sense, keep the unemployment rate steady," Bloxham said.

However, he noted the underemployment rate and the youth unemployment rate both increased in the month, indicating jobs remain on a loosening pathway.

"We expect that although they [Reserve Bank of Australia] will assess that the jobs market is gradually loosening, they will also say it is still 'a little tight'," Bloxham said.

"All up, with inflation set to still be too high (despite likely being lower than the RBA) and the jobs market still a little tight (despite being on a loosening trend) the August RBA board meeting is a live one."

VanEck senior portfolio manager Cameron McCormack said the investment manager believes there is at least one more rate hike coming this year, and a considerable chance of two hikes.

"Australia's labour market is determined not to give the RBA the breathing room it needs. Unemployment holding at 4.4% for a second consecutive month confirms the jobs market remains tight and firms the prospect of one more rate hike this year," McCormack said.

"With the economy close to full employment, the RBA has greater freedom to focus squarely on inflation without a cooling in the labour market."

"It will also be a tricky one - with the need to balance the high inflation challenge, and still somewhat tight jobs market against forward-looking readings suggesting that growth is already slowing and likely to weaken further yet," Bloxham added.