SYDNEY: Australia’s unemployment rate unexpectedly fell in November as the nation’s golden streak of hiring gains extended, underscoring the resilience of the labour market to elevated interest rates and prompting traders to pare back bets of a February interest-rate cut.
The Australian dollar extended an earlier rise while the yield on policy-sensitive three-year notes jumped 11 basis points to 3.83%, after official data yesterday showed the jobless rate slipped to 3.9% from 4.1% the prior month.
Economists had expected a tick up to 4.2%. Employment rose by 35,600 – driven entirely by full-time jobs – versus a forecast 25,000 gain.
Stocks gave up all gains and money markets now see a 50-50 chance of a rate cut in February, from 74% before.
Markets are viewing the drop in unemployment “as material ‘new news,’ said Andrew Ticehurst, a Sydney-based economist at Nomura Holdings.
“Our forecasts imply a much weaker jobs reading next month. Low inflation can still allow a rate cut, even if today’s unemployment rate does not suggest we require one.”
The stronger-than-expected outcome comes the week Reserve Bank (RBA) governor Michele Bullock made a surprising dovish tilt, citing weaker economic impulse and signs of easing price pressures.
A private survey of businesses on Tuesday showed conditions, which measure sales, profitability and employment, slumped in November.
The RBA’s rate-setting board kept its key rate at a 13-year high of 4.35% for a ninth consecutive meeting on Tuesday. Australian three-year bond yields have now pared all of their decline since the meeting.
“At this juncture, the still-tight labour market argues for patience from the RBA despite this week’s RBA communication opening the door to cuts in 2025 as early as February,” said Su-Lin Ong, Sydney-based chief economist at the Royal Bank of Canada. “Some loosening of the labour market is needed for the RBA to be truly confident that inflation will return sustainably to target. Today’s data do not suggest this.” — Bloomberg
