The report supports the Reserve Bank of Australia’s assessment that interest rate cuts are unlikely in the near term. — Reuters
SYDNEY: Australian employment blew past forecasts for a third straight month in August, yet the jobless rate held steady as the workforce also expanded at a rapid rate, reinforcing the view that the labour market remains tight.
The report supports the Reserve Bank of Australia’s (RBA) assessment that interest rate cuts are unlikely in the near term, with markets seeing scant prospects for a move at the policy meeting next week.
The Australian dollar pared earlier losses to be up 0.2% to US$0.6781, while bond futures extended declines, with three-years down 11 ticks to 96.53.
Markets also pared the chance for a first easing in December to 62% from 75% before the data.
Net employment jumped by 47,500 in August from July, according to the Australian Bureau of Statistics (ABS).
That was well above market forecasts for a 25,000 rise, though all the gains were in part-time employment.
Revised numbers for July showed a climb of 48,900, although that was down from an earlier figure of 58,200.
The jobless rate held at 4.2%, as expected, while the participation rate was steady at an all-time high of 67.1%.
“Another employment growth figure of close to 50,000 in August should dispel thoughts of imminent easing from the RBA,” said Robert Carnell, regional head of research, Asia-Pacific, at ING.
Carnell added the data series is extremely volatile, but three-month moving averages suggest the labour market stayed tight, driven by gains in full-time jobs.
“We remain of the view that the RBA will not be following the US Federal Reserve (Fed) anytime soon and that easing is going to be a 2025 story. If anything, we feel that the risks are that the RBA may start easing later, and by less in total for 2025.”
The RBA has held its policy steady since November, judging the current cash rate of 4.35% – up from 0.1% during the pandemic – is restrictive enough to bring inflation to its target band of 2% to 3% while preserving employment gains.
Overnight, the Fed joined other major central banks by cutting rates a half point as it looked to pre-empt any sharp deterioration in labour market conditions.
So far, that does not appear to be a concern for the RBA as the bank has been somewhat surprised by the strength in recent data such as hours worked and underemployment.
That is also a reason why underlying inflation, which ran at 3.9% last quarter, is only expected to return to target by the end of next year.
The jobs report showed hours worked rose a robust 0.4% in August, with the ABS noting that the proportion of people working fewer hours than usual due to economic reasons is below pre-pandemic levels.
Underemployment rose slightly to 6.5%, from 6.3%. — Reuters
