Unemployment’s up. Is it just noise or a sign of things to come?

The latest monthly unemployment data should all but seal an August rate cut, says Pendal’s Tim Hext.

Unemployment jumped to 4.3% in June – the highest rate since late 2021. Only a massive inflation surprise for the June quarter – due out next Wednesday – would stop an August rate cute, says Tim.

But is the June jobs data just noise or the start of a new, upward trend?

We won’t see further ABS jobs data until after next month’s RBA meeting.

But Tim notes that rapid growth in “non-market” jobs (mainly education and healthcare) has masked softer growth in “market” jobs for some time.

“There are signs this non-market job growth may be slowing, so unemployment may drift a bit higher into the end of year.

“However, forward indicators such as job vacancies and NAB’s monthly business survey do not suggest a sharp or rapid rise.”

Tim goes into detail here

Pendal profile: Meet our small-cap portfolio managers Lewis Edgley and Patrick Teodorowski

So far in 2025, the ASX Small Ordinaries Index has outperformed the ASX 200.

That dosen’t surprise Pendal’s small-cap PMs Lewis Edgley and Patrick Teodorowski, who expect smalls to bounce back as rates fall.

“We’ve seen in previous cycles when rates have started to be cut, that it tends to act as a positive catalyst for small caps,” says Patrick in a new Pendal video.

Patrick points to three diversification factors that experienced small-cap managers can use to their advantage:
1. The “sheer number of investable opportunities”, through which the team searches for mispriced opportunities
2. Wide sectoral breadth, which offers “money-making opportunities regardless of what the economy is doing”
3. And diversity of quality, which demands expertise and experience in finding the best businesses and avoiding the bad ones.

Watch the video here