Australia June jobs jump beyond forecasts, unemployment still up
2024.07.17 22:40
SYDNEY (Reuters) – Australian employment jumped well beyond expectations in June, yet the jobless rate still ticked higher as more people went looking for work, a mixed report that leaves open the question of whether interest rates need to rise further.
The data shifted investors’ expectations slightly towards a rate hike from the Reserve Bank of Australia in August, with swaps implying a 20% probability from 12% before.
The three-year bond yield rose 4 basis points to 4.019%, while the Australian dollar ticked up to $0.6735 although it was last flat on the day.
Figures from the Australian Bureau of Statistics on Thursday showed net employment climbed 50,200 in June from May, topping market forecasts for 20,000. Full-time employment rose 43,300 for a second month of strong gains.
The jobless rate still edged up to 4.1%, from 4.0%, compared to forecasts of a steady outcome. The participation rate rose to near an all-time high at 66.9%, while hours worked bounced 0.8% as fewer workers than usual took holidays in the month.
“The labour market is slackening, with the upward drift in the unemployment rate becoming more entrenched. But the market remains is a very tight position,” said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.
“The current pace of employment growth suggests demand is resilient and cost pressures will remain. We think the RBA will stay the course and keep rates on hold, but August is certainly a live meeting.”
The RBA has held interest rates steady for five straight meetings now, but policymakers were pondering whether the current policy rate of 4.35% is restrictive enough as inflation remained high at 4% in the last quarter, above its target band of 2-3%.
Much will depend on the second-quarter consumer price report due on July 31, where inflation is expected to edge higher and come in above the central bank’s own forecasts.
Globally, central banks have already started cutting or signalling their intention to do so. The European Central Bank cut in June, the Federal Reserve is seen almost certain to cut in September, while the Reserve Bank of New Zealand opened the door to easing just this month.
As a result, swaps have scaled back their bets of another hike from the RBA this year, although the first easing is not likely until mid next year as interest rates here have not risen as much as in other countries.
Also, the bar to hike is high especially given the RBA’s worries of a sharp slowdown in the labour market. Job vacancies continued to fall from elevated levels, an employment gauge in a closely watched business survey showed no growth, and wage growth clearly peaked.
