Soft GDP and the removal of some of the RBA's hawkish language had investors looking forward to an early 2025 rate cut. Today's employment surprise makes that marginally less likely, with the Board having more data and forecasts to review at the next meeting in early February.
The headline seasonally-adjusted unemployment rate unexpectedly dropped from 4.1% to 3.9% in November, according to ABS figures. Forecasters had been expecting a rise to 4.2%.
A -0.1% fall in the participation rate from 67.1% to 67.0% accounted for some of the move. But an estimated +35.6k new jobs were also added to the economy, with full-time workers (+52.6k) replacing part-time (-17.0k).
The employment-to-population ratio returned to the record high of 64.4%.
Hours worked fell -0.2% in seasonally adjusted terms during the month but are up +2.1% compared to last year.
David Taylor, ABS head of labour statistics, said: “In November we saw a higher than usual number of people moving into employment who were unemployed and waiting to start work in October [...] The recent growth in population has boosted the labour supply as employment has kept up with population growth [...] Despite the slight fall in hours worked in November, hours grew over the year in line with employment and population growth [...] Compared with outcomes before the COVID-19 pandemic, the unemployment and underemployment measures are still low, while trend employment and participation measures are around all-time highs. This suggests the labour market continues to be relatively tight".
S&P/ASX200 8,349 -0.1%, AUDUSD 0.6402 +0.53%, Aus 2yr 3.85% +8bps, Aus 10yr 4.26% +7bps
Fin-X Wealth View
The recent GDP weakness had significantly altered perceptions of the strength of the Australian economy, resulting in expectations for the first RBA cut being pulled forward from around April next year to as soon as February.
The next rate move is still likely to be down. But the strength in today's employment data may serve to remove some of the urgency. Pricing of the first cut has shifted back to April at the latest, with February being a 50/50 chance. Yields have risen and the Australian dollar has strengthened as a consequence.
However, employment data is notoriously noisy, and the trend data is much steadier. So, it's difficult to read too much into a single report.
The RBA will have another month's employment data, the Q4 CPI figures and the updated quarterly forecasts to hand when it makes its next decision on February 6th.
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