Labour market conditions in Australia rebounded in July, with full-time employment increasing sharply after a previous decline and the unemployment rate falling slightly after it had risen to its highest level since late 2021. Reserve Bank of Australia officials noted that labour market conditions"remain a little tight" in the statement accompanying its decision to cut policy rates earlier in the week, and today's data suggest that wage pressures may remain a cause for concern.

The number of people employed in Australia rose by 24,500 persons in July after increasing by 1,000 persons in June, close to the consensus forecast for an increase of 25,000. This increase was driven by full-time employment, which rose by 60,500 persons after a previous decline of 36,700 persons. Part-time employment, in contrast, fell sharply, down 39,500 persons after a previous increase of 37,700 persons. Hours worked rose 0.3 percent on the month after falling 0.9 percent previously.

Today's data also show the unemployment rate fell from 4.3 percent in June to 4.2 percent in July. The participation rate was unchanged at 67.0 percent, just below the record high of 67.2 percent recorded in January.

After flatlining for two months, employment is expected to improve slightly in July. The picture remains troubling and provides the RBA another reason to cut. Employment is expected up 25,000 on the month in July versus 2,000 in June. The unemployment rate is seen at 4.2 percent versus 4.3 percent in June.

The Labour Force Survey is a key economic indicator giving an overall picture of employment and unemployment. Employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The unemployment rate measures the number of unemployed as a percentage of the labour force.

This report is used as an indicator of the health of the domestic economy. Employment trends highlight the strength in job creation and the implications for future sectoral activity. The unemployment rate is used as an indicator of tightness in labor markets and can foreshadow a future increase in wages. Labor force data provide investors with the earliest signs of industry performance. While other data are produced with a month or two delay, these data are available only a week to 10 days after the end of the latest month. Reactions can be dramatic - especially when the result is unanticipated.

The information in the report is invaluable for investors. By looking at employment trends in the various sectors, investors can take more strategic control of their portfolio. If employment in certain industries is growing, there could be investment opportunities in the firms within that industry.

The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.

The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.