The surprise rise in the unemployment rate to 6.4 per cent in July will come as a shock to many analysts and policy makers, and seems to run counter to recent tentative signs of improvement in corporate hiring indicators. As seen in the chart set below, most business survey employment indicators have turned (gradually) upward since around mid-late 2013.

According to the Australian Bureau of Statistics, the change in the unemployment rate last month could be noisier than usual because of sample rotation – the latest batch of new households to be rotated into the survey had a notably higher rate of unemployment than among the batch of households rotated out. That said, history shows that when the unemployment rate tends to jump in a given month, relatively little of this increase is given back in subsequent months.

An even more serious question is whether the recent tentative sign of improvement in corporate hiring intentions will be sustained, especially as other leading indicators such as retail spending and home building approvals have eased back in recent months. Maybe households know more than business, as they’ve yet to sense any great improvement in labour market conditions.

All up, today’s unemployment result affirms my view that if official interest rates go anywhere this year, it will be more likely down than up.