BCEC Monthly Labour Market Update – July 2025

• Rebound in employment in July; job vacancies and hours worked also up.
• Female participation rate hits record 63.5 per cent.
•  Real wage growth in positive territory, but yet to claw back losses since 2020.

“I’m not dead yet”

After two months of stagnating jobs growth, the big question surrounding the release of the July labour force figures was whether they would confirm a downturn in the Australian labour market was underway.

The figures didn’t give a lot away.

The number of persons in employment increased by a modest 24,500.

That followed a fall of 3,000 jobs in May and a weak 1,000 increase in jobs in June.

This month’s increase is pretty much in line with the longer-term trend rate of employment growth.

The weak May and June figures that spooked the markets could well be attributed to statistical noise following the large 86,500 jump in jobs in the April estimates.

The July figures are more consistent with a gradual softening in the labour market rather than a pronounced downturn.

Other recent indicators have also been generally positive.

Perhaps the most important figure in the July estimates was the strong increase in full-time employment of 60,500 positions.

The number of job vacancies advertised on the internet also rose marginally, the underemployment rate fell, and average hours worked increased.

After reaching record highs over 2022 and 2023, vacancies have been steadily trending downwards.

The year-on-year declines seem to have bottomed out in March, with a slight rise in vacancies in July, leaving the Internet Vacancy Index almost flat over the past year, consistent with demand stabilising.

Having cut interest rates just days before the labour force figures were released, the Reserve Bank Board are likely to be feeling quite comfortable with the outcome.

The unemployment rate edged back down from 4.3 per cent to 4.2 per cent in July, aligning closely with the RBA’s forecasts of the unemployment rate stabilising at 4.3 per cent over 2025-2026.

Encouragingly for homeowners, the RBA’s outlook is premised on the cash rate dropping to 3.4 per cent for the December quarter of 2025 and 3.1 per cent by mid-2026.

That suggests at least one more 25 basis point cut in interest rates this year.

The relatively high overall labour force participation rate of 67.0 per cent – which saw the participation rate for women hitting a record high of 63.5 per cent in July – mitigates against the chances of the unemployment rate escalating rapidly in coming months.

It’s worth registering one note of caution against projecting national trends from this latest readout.

All of the growth in jobs and in full-time jobs in July were attributable to just one state – NSW – with employment actually falling across the rest of the country.

Real wages ‘moving again’ but still lagging

The release of two key measures of wages – the wage price index (WPI) and average weekly ordinary-time earnings (AWE) – in the same week as the July labour force figures provides an opportunity to take stock of wage movements up to the June Quarter, 2025.

Both show wages to have increased faster than prices over the past 12 months, with a real increase in the WPI of 0.1 per cent for the year, and in AWE of 2.4 per cent.

The Federal Labor government has made repeated claims to have got real wages ‘moving again’.

The most recent data do confirm that real wage growth is back in positive territory, but only very marginally based on the WPI.

Further, real wages have only just pegged back to the level they were at when the Labor government was elected.

Compared to the June quarter of 2022, AWE are up by just 1.0 per cent in real terms, and the WPI is still 0.7 per cent lower in real terms.

Essentially, real wages have only just now clawed back the declines seen through 2022 and 2023.

Over the longer term, both WPI and AWE are around 5 per cent lower in real terms than their peak in 2020.

On the positive side, annualised wage increases contained in federal enterprise bargaining agreements approved in the first quarter of this year averaged 3.8 per cent.

This suggests further gains in real wages in the coming quarters if inflation remains around the middle of the RBA’s 2-3 per cent target range.