Australia's Job Market Holds Strong Amid Middle East Turmoil: What's Next?

Australia's labour market continues to show resilience, with the unemployment rate expected to hold steady at 4.4% in June. However, renewed conflict in the Middle East threatens to disrupt this positive trend.

Jobs Data Highlights

The Australian Bureau of Statistics will release June labour force figures on Thursday. After a surprisingly strong addition of 40,000 jobs in May, economists project employment growth to slow to 20,000. With the participation rate holding at 66.7%, the unemployment rate could even decline to 4.3%.

ANZ economist Aaron Luk noted that only a small decline in the number of unemployed would bring the rounded figure down, despite his base case forecast of steady unemployment. Early evidence suggests the labour market is starting to soften, according to NAB chief economist Sally Auld, who expects the unemployment rate to drift higher over the second half of the year.

Middle East Conflict Impact

Any optimism from Australia's robust jobs market could be undone by the re-escalation of the US-Iran conflict. Oil prices have rebounded since the closure of the Strait of Hormuz, and reports suggest Iran could direct Houthis to close the Red Sea oil route if US strikes escalate. This threatens greater disruption to energy supplies.

For the Reserve Bank, any resumption in the Middle East conflict is likely an upside risk to inflation. ANZ economists do not rule out ongoing price pressures pushing the RBA to a November rate hike. NAB's Dr Auld expects Brent crude oil to bounce between $US70 and $US90 a barrel, but if prices move higher, it could be the "worst of both outcomes" for the RBA—higher inflation and a hit to real incomes.

Global Market Reactions

A potential slowdown in the artificial intelligence boom has also caught Wall Street's attention. The Dow Jones fell 0.77%, the S&P 500 lost 1.01%, and the Nasdaq dropped 1.40%. Australian share futures climbed 0.61%, while the S&P/ASX200 fell 0.5% on Friday.

Stay tuned for the official jobs data release and its implications for Australia's economic outlook.