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Although Australian employment grew by 38.5k jobs, surpassing the consensus expectation of 23.7k, the labour market report's details were disappointing for several reasons.
Australia Employment Release
Historical Data for Employment Change in Australia
Firstly, the growth in employment was solely in part-time work, which increased by 44.6k jobs, while full-time employment decreased by 6.1k jobs. Secondly, the total hours worked during the month remained unchanged. Thirdly, the slower job growth pace could not keep up with the influx of new job seekers, causing the unemployment rate to rise from 3.9% to 4.1%. Although the unemployment rate was rounded up from 4.05%, it still aligns with the RBA’s Q2 forecast in the first quarter of the month. Additionally, the worker underutilization rate rose from 10.30% to 10.7%, its highest level in three months.
Australia Bureau Labour Statistics
Following the labour market data release, the Australian rates market shifted from considering a modest chance of a rate hike by year-end to pricing in about a 50% chance of a rate cut by year-end, which has negatively impacted the AUD. However, we believe this market reaction is excessive, as labour market data is notoriously volatile and was likely affected by the Easter holidays.
AUDUSD H1 Chart
The ABS noted that of the 30k increase in unemployment, a significant number of individuals reported having a job but were waiting to start. Therefore, Australia's unemployment rate is expected to reverse next month. The employment-to-population ratio remained at 64%, indicating little easing in labour market slack this month.
Moreover, a substantial amount of stimulus will be injected into the economy over the next six months as the government implements rental and electricity rebates, and the Stage 3 income tax cuts take effect on July 1. Consequently, the most likely scenario for interest rates remains the RBA maintaining its current stance throughout 2024.
Insights Inspired by Credit Agricole (FX Daily USD): Credit to Their Analysis for Shaping Some Aspects of This Text
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