Australian Employment Report – August

By Stella Qiu and Wayne Cole

SYDNEY (Reuters) – Australian employment exceeded expectations for the third consecutive month in August, with the jobless rate remaining steady and the workforce experiencing rapid growth, indicating a tight labor market.

The report aligns with the Reserve Bank of Australia’s assessment that interest rate cuts in the near future are unlikely, with markets anticipating little change at the upcoming policy meeting.

The Australian dollar recovered from earlier losses, rising 0.2% to $0.6781, while bond futures fell, with three-year bonds down 11 ticks to 96.53. Following the data, the likelihood of a first rate cut in December decreased from 75% to 62%.

Net employment rose by 47,500 in August compared to July, significantly surpassing the market forecast of 25,000, although all gains were in part-time positions.

Revised figures for July showed an increase of 48,900, a decrease from the previously reported 58,200.

The jobless rate remained at 4.2% as anticipated, while the participation rate held steady at a record high of 67.1%.

Robert Carnell, regional head of research for Asia-Pacific at ING, stated, “Another employment growth figure of close to 50,000 in August should dispel thoughts of imminent easing from the RBA.”

RBA to Lag Fed Pace

Carnell noted that despite the extreme volatility of the data series, three-month moving averages indicate a sustained tight labor market, boosted by increases in full-time jobs. He believes that the RBA will not closely follow the Fed’s pace, suggesting that easing may push into 2025.

The RBA has maintained its policy since November, viewing the current cash rate of 4.35%—up from 0.1% during the pandemic—as adequately restrictive to meet inflation targets while still supporting employment.

In contrast, the Federal Reserve has recently reduced rates by a half point to mitigate potential downturns in labor market conditions. However, the RBA has been surprised by the recent strength of key data, such as hours worked and underemployment.

Underlying inflation, currently at 3.9%, is not expected to return to target until late next year.

The jobs report indicated a robust 0.4% rise in hours worked in August, with the ABS reporting that fewer individuals are working reduced hours due to economic reasons compared to pre-pandemic levels. Underemployment slightly rose to 6.5% from 6.3%.

Stephen Miller, GSFM investment strategist, remarked, “Today’s labor force data will disappoint those looking for an ‘early’ policy rate cut, as there is no noticeable deterioration in the labor market on which the RBA could signal a near-term policy rate cut.”