Australian Unemployment Unexpectedly Jumps to Four-Year High
Australian unemployment unexpectedly climbed to a four-year high in June as hiring almost stalled, suggesting a loosening of the labor market and bolstering the case for the Reserve Bank to reduce interest rates next month.
The currency declined by more than a half percent as the jobless rate increased to 4.3%, the highest level since November 2021 and exceeding forecasts for an unchanged 4.1%, data from the Australian Bureau of Statistics showed Thursday. Employment rose by 2,000 driven entirely by part-time roles, against economists’ expectations of a 20,000 gain.
The yield on policy-sensitive three-year government bonds fell almost 10 basis points while stocks advanced. Money market bets firmed to fully price a cut in August and another after that, with a better than 50% chance of a third.
The data is crucial for RBA policymakers as the resilience of the labor market, and worries about it rekindling price pressures, have been key reasons why they’ve shown patience in the current easing cycle. The central bank has cut twice since the start of the year — shocking the market last week with a decision to hold — and today’s weak report, following a subdued reading in May, could suggest a turn in fortunes.
“The consecutive poor jobs prints and the jump in unemployment rate to 4.3% is likely to spook the RBA,” said Alex Loo, a macro strategist at Toronto-Dominion Bank in Singapore. “Investors are likely to read that the RBA may opt for consecutive cuts in August and September now.”
The central bank’s board said after its shock pause at 3.85% that it wanted to wait for further evidence that inflation was sustainably hitting the midpoint of its 2-3% target. The quarterly CPI report due on July 30 is seen as the next major reading for the policy outlook.
Others are more downbeat. The data “support our view that Australia’s labor market is no longer tight and should not be a barrier for further cuts,” said Andrew Boak, chief economist for Australia at Goldman Sachs Group Inc.
Australia’s economic momentum remains subdued with consumer confidence and household spending tepid. Global uncertainty is also elevated in the run-up to President Donald Trump’s tariff deadline on Aug. 1.
The trade uncertainty is weighing on business investment and prompting firms to rethink hiring plans, economists said. Even though Australia got off lightly with a 10% baseline tariff rate, as an export-reliant economy its fortunes are heavily geared to those of its trading partners.
“Today’s data will reinforce the weakness that is continuing within the private side of the Australian economy,” said Brendan Rynne, chief economist at KPMG, “and by itself should be enough for the RBA to drop the cash rate at its next meeting.”
Australian Prime Minister Anthony Albanese is in China this week as he looks to boost ties with his country’s No.1 trading partner in order to generate local jobs and spur the domestic economy. The two sides agreed to keep expanding engagement in bilateral trade, climate change and people-to-people links, they said in a joint statement on Tuesday.
Source : Bloomberg
