Job creation has been holding up despite a wounded economy, with employment gains expected again in August.

Australia’s labour market has been softening bit-by-bit in line with a broad economic slowdown engineered to bring down still-elevated inflation. 

Yet considering sluggish economic performance, demand for labour remains relatively strong and a bright spot repeatedly highlighted by the federal government. 

Prime Minister Anthony Albanese hopes Thursday’s labour force readout from the Australian Bureau of Statistics will show more than one million jobs have been created since his government took office.

In July, the jobless rate ticked up 0.1 percentage point for the second month in a row to 4.2 per cent in July, broadly in line with consensus forecasts.

But the 58,000 jobs added to the economy in the month were more than market expectations of a 20,000 gain.

In August, Commonwealth Bank economists were expecting the economy to add around 20,000 jobs and an unemployment rate rising to 4.3 per cent.

While the jobless rate has drifted higher from the mid-three readings in 2022, Reserve Bank assistant governor Sarah Hunter says the labour market is still tight relative to what’s known as “full employment”.

That’s the maximum level of employment consistent with low and stable inflation.

Yet the RBA still expects demand for labour to grow at a slower pace and gradually bring it back into better balance.

CreditorWatch chief economist Anneke Thompson said the jobs data would be “very illuminating” about what the future holds for the Australian economy.

The credit reporting bureau’s monthly business risk index has been signalling “extremely challenging conditions”, especially in food and beverage, retail and construction.

“Under these circumstances, it is almost certain that unemployment will continue to rise – the question is by how much?” Ms Thompson said.

The economist said strong public sector employment, especially in the disability sector, was masking weaker underlying job creation in the private sector.

“We don’t expect businesses to feel more confident until there have been at least two or three cuts to the cash rate,” she said.

This post was originally published on Michael West.