By Stella Qiu
SYDNEY (Reuters) -Australia’s jobless rate posted a shock decline to an eight-month low in November, while employment extended its strong run, evidence of a far more resilient labour market than many had expected.
The surprising strength prompted markets to scale back bets for an easing from the Reserve Bank of Australia in February, just days after the central bank unexpectedly turned dovish by opening the door to a rate cut.
The Australian dollar rose 0.6% to $0.6409, while three-year bond futures fell 7 ticks to 96.192. Swaps now imply a 55% chance of a cut in February, compared with 68% before.
Figures from the Australian Bureau of Statistics on Thursday showed the jobless rate dropped to 3.9% in November, the lowest since March, from 4.1% in October. Analysts had looked for a rise to 4.2%.
The participation rate edged down to 67.0%, from 67.1%.
Net employment rose by 35,600 in November from October, when it increased by a revised 12,200. That was above market forecasts for a 25,000 rise and driven by gains in full-time employment.
“Softer economic data from the recent national accounts release raised the risk of a February cut, but this labour market result offsets that risk somewhat,” said Adelaide Timbrell, a senior economist at ANZ.
The RBA has held its policy steady for a year, 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 2-3% while preserving employment gains.
Governor Michele Bullock has said policymakers will be watching the jobs report, as well as readings on inflation and retail sales before it next meets in February.
The dovish pivot came after data showed economic growth in the third quarter was surprisingly weak, defying expectations for a rebound. Wage growth has also underwhelmed, suggesting unemployment perhaps does not need to rise further to keep inflation anchored.
The ABS said there was a higher-than-usual number of people moving into employment in November who were unemployed and waiting to start work the previous month. Unemployment also fell 27,000.
The jobs report showed hours worked remained flat in November, while the underemployment rate fell 0.1 percentage points to 6.1%, the lowest since April 2023.
Tapas Strickland, head of market economics at the National Australia Bank (OTC:NABZY), said if the labour market starts to re-tighten and sustain the trend, it would pose a problem to the RBA’s newfound degree of confidence in its forecasts.
“There is one more employment print and the Q4 CPI ahead of the RBA’s February meeting,” said Strickland.
“While we expect Q4 CPI to be a little below the RBA’s November forecast, that alone is unlikely to be enough to see the RBA cut in February given the labour market continues to suggest little urgency for the RBA to adjust policy settings.”
