The Australian dollar has slumped and the money markets are calling a 100 per cent chance of a rate cut after new data revealed a shock fall in the employment rate.

The unemployment rate rose to 4.3 per cent last month, beating market expectations of 4.1 per cent, according to the Australian Bureau of Statistics.

Employment as a whole rose by 2000 people this month, following a fall of 1000 in May, and is up 2 per cent year on year.

The rise in unemployment was determined as 33,600 workers became unemployed in June.

This was against expectations of 20,000 jobs to be added in the month and the unemployment rate to hold.

Markets immediately jumped on the news, with investors now banking on a future rate cut.

With expectations of lower rates, the Australian dollar slumped back below 65 US cents, while Australia’s sharemarket jumped on the news.

IG market analyst Tony Sycamore said the bond market was quick to react to Thursday’s data, moving up expectations of a rate cut from 80 to 100 per cent in August.

“Today’s rise in the unemployment rate pushes it above the RBA’s forecast of 4.2 per cent for June 2025 and meets the 4.3 per cent rate the RBA expected by year-end,” he said.

“Combined with last month’s fall in employment, there are clear signs of deceleration emerging in the labour market.

“This calls into question the RBA’s decision to prioritise inflation over growth and jobs at its board meeting earlier this month.

Betashare chief economist David Bassanese, who called a hold in July, said Thursday’s unemployment data was a “slam dunk” for an August rate cut.

“We’ll need more consistent signs of weakness in both employment and hiring indicators before we can conclude the labour market is turning,” he wrote in an economic note.

“That said, today’s result clearly adds to the case for a RBA rate cut at the August policy meeting provided next week’s Q2 CPI report is not a shocker.”

With the unemployment rate lurching higher, growth at subpar levels, and inflation back within the RBA’s target band, the RBA will no doubt be keen to make amends at its meeting in August.

The underemployment rate also increased to 6 per cent, as 40,200 part-time roles were created and 38,200 full-time roles were lost from the job market.

Australia’s unemployment rate unexpectedly rose in June. Picture: NewsWire / David Geraghty

The employment-to-population ratio remained at 64.2 per cent, and the participation rate, being people who are actively working, rose to 67.1 per cent.

Hours worked fell 0.9 per cent in June, following a rise of 1.4 per cent in May.

ABS head of labour statistics Sean Crick said: “This month we saw a decrease in full-time hours worked, down 1.3 per cent, associated with a 0.4 per cent fall in full-time employees.”

Prior to Thursday’s figures, experts had tipped the unemployment rate to remain at 4.1 per cent, although they did predict a tightening of the jobs market.

The Reserve Bank of Australia will be watching the jobless rate ahead of its next meeting, having the dual mandate of employment and controlling inflation.

“I think the focus for the RBA will be ensuring the labour market remains healthy going forward,” NAB’s head of Australian economics Gareth Spence said.

“The timing of cuts is not super important.

“It’s more about where do they end up.”

In a move that shocked markets and disappointed homeowners, the RBA kept the official cash rate at 3.85 per cent during its July 8 meeting.

Most economists had already pencilled in a rate cut as well as another cut in August.