Steady Australian unemployment rate makes near-term interest cut unlikely
Australia’s unemployment rate held steady last month as employers kept hiring at almost the pace of a swelling population.
The jobless rate in October was 4.1% for a third consecutive month, the Australian Bureau of Statistics said on Thursday. The result was in line with economists’ forecasts and matched a similar outcome for September.
The economy added 9,700 full-time jobs and 6,200 part-time roles, making a net change of 15,900 positions. Economists had tipped employers would add a net 25,000 jobs in October.
A slight drop in the participation rate from a record 67.2%, seasonally adjusted, reported for September to 67.1% last month helped to explain the unchanged jobless rate.
The overall labour market remained relatively tight even as the number of unemployed rose 8,000, bringing the tally to 623,500, or 67,000 more than a year ago. The jobless rate, while up from the June 2023 low of 3.5%, remains well below the pre-Covid pandemic low of 5.2%, the ABS said.
The data prompted NAB, one of the big four banks, to push back the timing of when it expects the Reserve Bank of Australia to start cutting interest rates from February to May.
“There is a real risk that policy rates stay on hold even deeper into 2025 should the labour market remain tight and services inflation remain elevated,” said Tapas Strickland, NAB head of markets economics.
The Reserve Bank has a dual mandate to keep inflation within its 2-3% target range but also to ensure the economy is as close to full employment as possible.
The labour market has been surprisingly strong for most of 2024. Demand for labour has helped nudge real wages higher but has also left inflation in the service sector in particular more elevated than the RBA would prefer before it starts to cut its cash rate.
Prior to Thursday’s jobs data, investors were not fully pricing in an RBA interest rate cut until next August. The initial market reaction was modest, with the Australian dollar hovering just below 65 US cents and stocks holding on to their gains for the morning of about 0.5%.
Still, there are signs of emerging weakness in the labour market, much as the central bank expects. The RBA’s latest forecast has unemployment creeping up to 4.3% by year’s end.
BDO Economics partner Anders Magnusson said the strength of the labour market may make the RBA jobless estimate “an overestimate”.
“The RBA won’t be pleased as a weakening to 4.2% [for October] would have indicated that the cash rate was adequately restrictive,” Magnusson said. “Unlike other advanced economies, Australia continues to maintain a strong labour market.”