A jump in Australia's unemployment rate could show that the economy is slowing as expected and take pressure off the Reserve Bank to raise interest rates again.
Inflation is still too high and, while the economy is softening, more of a slowdown is needed to get inflation back to target, the bank's deputy governor Andrew Hauser said on Wednesday.
Jobs figures released by the Australian Bureau of Statistics on Thursday will give the bank another sense of whether its forecasts of a modest easing in the labour market are on track.
"We’re not seeing in our forecasts a reduction in the number of jobs in the economy, but it’s a lot slower than Australia has known in the past and it’s a lot slower than recently," Mr Hauser said.
Economists at Westpac expect the July labour force survey to show a lift in employment of 15,000, well down from the 76,300 new jobs added to the economy in June.
That should leave the unemployment rate at 4.4 per cent.
The Reserve Bank has forecast the jobless rate to rise to 4.5 per cent by the end of the year, so a weaker-than-expected print would add more weight to the argument that the economy is slowing as planned.
But Westpac economist Ryan Wells says the slack in the labour market is more likely to emerge later in the year.
Despite the jump in employment in June, a 0.3 percentage point bounce in the participation rate caused the unemployment rate to edge slightly higher from 4.37 per cent to 4.43 per cent.
That is a sign of a labour market that is neither very tight nor particularly soft.
"Employment and participation both rose strongly, but unemployment also edged higher," Mr Wells said.
"That is not a sign of an overly tight labour market, but it is not clear evidence of outright weakness either.
"It suggests that labour demand and supply are moving broadly in step, with monthly noise determining whether the unemployment rate nudges up or down."
