Australian employment came in weaker than expected in September, reflecting the Reserve Bank’s assessment that the labor market has reached a “turning point,” while fewer people searching for work sent the jobless rate lower.
(Bloomberg) — Australian employment came in weaker than expected in September, reflecting the Reserve Bank’s assessment that the labor market has reached a “turning point,” while fewer people searching for work sent the jobless rate lower.
The economy added 6,700 roles from the prior month — driven primarily by part-time jobs — well below estimates for a 20,000 gain and the participation rate slipped to 66.7% from 67%, Australian Bureau of Statistics data showed Thursday. The unemployment rate slid to 3.6%, having hovered in a range of 3.4%-3.7% since June last year,
The data chime with the RBA’s recent assessment that the labor market is beginning to cool in response to higher interest rates. New Governor Michele Bullock this week highlighted a series of obstacles to cooling inflation pressures, including low unemployment.
The softer than expected data gave traders pause for thought on the next RBA move, with policy-sensitive three-year yields paring an earlier rise and the Aussie extending a decline to trade 0.4% weaker.
“There was enough in the labor force print for the RBA to conclude that there is still tightness in the jobs market and that will be supporting wages growth,”said Alex Joiner, chief economist at IFM Investors in Melbourne.
“The CPI data next week are crucial and as Governor Bullock underscored in her comments this week the bank has a very low tolerance for any upside surprise on inflation,” he said.
The RBA held rates at 4.1% for a fourth straight month in October and economists and money markets are divided on the outlook. The former expect one more hike to 4.35% as soon as November, while traders are suggesting rates have now peaked as inflation looks to be headed in the right direction.
Thursday’s figures showed that annual jobs growth eased to 2.9% from 3.1% at the start of the year. Economists expect the pace of gains to slow further with the jobless rate seen climbing to 4.5% next year.
“The fall in the unemployment rate in September mainly reflected a higher proportion of people moving from being unemployed to not in the labor force,” said Kate Lamb, ABS head of labor statistics. “Demand for workers has fallen slightly, but the labor market continues to be relatively tight and resilient.”
The labor data also showed:
- Underemployment slid to 6.4% and under-utilization fell to 9.9%
- Full-time roles tumbled by 39,900, while part-time jumped 46,500
- The employment to population ratio decreased to 64.4%
The figures support expectations that Australia will avoid the type of wage-price spiral seen in many developed economies, with annual pay gains currently at 3.6% and expected to peak at around 4%.
–With assistance from Tomoko Sato.
(Adds comment from economist.)
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