The S&P/ASX 200 Index (ASX: XJO) is powering higher this Thursday after the release of the latest employment figures from the Australian Bureau of Statistics (ABS).
At the time of writing, the ASX 200 is up a healthy 0.39% and back over 7,180 points.
The ASX 200 had already recovered from a morning slump by the time these figures had been released. But they have certainly helped propel the index higher as we get into afternoon trading.
So let's dig into what these latest figures have to say about the state of the Australian economy.
According to the ABS, Australian employment was surprisingly strong over the month of August, with employment increasing by roughly 65,000 people. With the number of unemployed persons dropping by a slight 3,000 people, the unemployment rate remains at a seasonally-adjusted 3.7%, flat on July's figure.
This represents an increase in employment of 2.9% over the past 12 months. Further, it was revealed that hours worked in August fell by 0.5% compared to July. However, August's numbers are still 3.7% higher than they were a year ago.
Here's some of what Bjorn Jarvis, head of labour statistics at the ABS, had to say on these latest numbers:
The large increase in employment in August came after a small drop in July, around the school holiday period. Looking over the past two months, the average employment growth was around 32,000 people per month, which is similar to the average growth over the past year.
The employment-to-population ratio rose 0.1 percentage point to 64.5 per cent, around the record high in June. The participation rate also increased, up to a record high of 67.0 per cent in August, which, together with the high employment-to-population ratio, continues to reflect a tight labour market…
The strength in hours worked over the past year, relative to employment growth, shows the demand for labour is continuing to be met by people working more hours, to some extent.
What does the latest employment data mean for ASX 200 shares?
These figures are remarkable considering the flurry of interest rate hikes that the Australian economy has endured since this time last year. Back in August of 2022, the cash rate was sitting at 1.85%, less than half the current rate of 4.1%. Since this time last year, the RBA has raised interest rates eight times.
Yet these latest unemployment metrics show an economy in robust health. This reasoning is probably what is behind ASX 200 investors' enthusiasm today. A strong economy obviously bodes well for the ASX shares that operate within it.
It will be interesting to see what the RBA makes of this latest data. The Bank has been pursuing a soft cooling of the economy to tame the rampant inflation we have seen over the past year or two.
Lower unemployment is often conducive to higher inflation, so if the RBA sees inflation ticking up over the next month, it may be forced to once again raise interest rates at its next meeting. However, it seems that ASX 200 investors aren't viewing that as too likely, judging by the market's reactions today.
