The S&P/ASX 200 Index (ASX: XJO) was up 0.8%, trading higher than 7,380 points this morning.
Then the Australian Bureau of Statistics (ABS) released the latest round of jobs data.
That data saw the ASX 200 tumble 0.8% to trade almost flat in the early afternoon before picking up slightly to 7343.7 points.
Why the retreat?
Because Australia's job market remains surprisingly resilient, despite the past 14 months of rapid interest rate hikes.
And in the old 'good economic news is bad news for stocks' mantra, ASX 200 investors are hitting the sell button amid increased expectations of yet another rate hike from the Reserve Bank of Australia (RBA) in August.
What did the ABS report?
The ASX 200 is under pressure this afternoon after the ABS reported the unemployment rate remained at 3.5% in June.
Employment increased by some 33,000 people, almost double consensus expectations.
"The rise in employment in June saw the employment-to-population ratio remain at a record high 64.5%," Bjorn Jarvis, ABS head of labour statistics, said.
Jarvis said this reflects "a tight labour market in which employment has recently increased in line with population growth".
And he noted the big lift in employment from the pre-pandemic times in early 2020:
In addition to there being over a million more employed people than before the pandemic, a much higher share of the population is employed. In June 2023, 64.5% of people 15 years or older were employed, an increase of 2.1% since March 2020.
What can ASX 200 investors expect now?
While June unemployment remains at near historic lows, CreditorWatch chief economist Anneke Thompson believes we'll see unemployment figures tick up over the coming months.
"We expect that weakness will emerge in the labour sector as we move through the second half of 2023," she said.
If that eventuates, it would likely be enough to see the RBA hold off on further rate hikes, post August. That could offer ASX 200 shares some helpful tailwinds heading into 2024.
Thompson added:
Major firms like Telstra Group Ltd (ASX: TLS), Lendlease Group (ASX: LLC) and Westpac Banking Corp (ASX: WBC) have announced redundancies as part of restructuring. We expect that as business conditions continue to weaken and profit margins fall, headcounts will get a lot of attention, particularly given the very strong headcount growth since the pandemic.
As for whether ASX 200 investors should expect the RBA to lift rates in August, Thompson said the latest jobs data won't "help the RBA solidify their position ahead of August's board meeting".
She advised keeping an eye on the monthly inflation figures, out next week, to get a better grasp on the central bank's likely decision.
But ASX 200 shareholders would do well to prepare for at least one more interest rate hike.
"At this point, we still err on the side of another increase at the August meeting," Thompson said.
