Australia unemployment stays low at 4.1%, full-time jobs jump
Markets now imply around a 77 per cent chance the RBA will raise its policy interest rate by another 25 basis points to 4.10 per cent in May
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[SYDNEY] Australian employment posted a solid rise in January as companies took on more full-time workers, data showed on Thursday, while the jobless rate stayed at a multi-month low in further evidence of a resilient labour market.
The upbeat report supported the Reserve Bank of Australia’s judgement that the labour market is still a little tight and led markets to slightly narrow the odds on a further hike in interest rates as soon as May.
Figures from the Australian Bureau of Statistics showed net employment rose 17,800 in January from December, when it jumped a revised 68,500. That was in line with market forecasts, while full-time jobs boasted another strong gain of 50,500.
The jobless rate held at 4.1 per cent, the lowest reading since last May, when analysts had looked for a rise to 4.2 per cent. The participation rate stayed at 66.7 per cent, while hours worked increased by a healthy 0.6 per cent with fewer workers than usual taking leave.
The strength of the labour market was one reason the RBA reversed course and hiked interest rates earlier this month, and the latest data added to the case for further tightening.
Markets now imply around a 77 per cent chance the RBA will raise its policy interest rate by another 25 basis points to 4.10 per cent at its May meeting, up from 70 per cent before the jobs report.
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A hike is almost fully priced for July and the market has 39 basis points of tightening implied for all of 2026.
Three-year bond futures duly slid 5 ticks to 95.690, while 10-year bond yields rose 3.5 basis points to 4.76 per cent. The Aussie dollar edged up 0.1 per cent to US$0.7050.
For interest rates, much will depend on consumer price data for the first quarter, due in late April. Should core inflation stay stuck around 3.3 per cent, and beyond the RBA’s 2 to 3 per cent target band, analysts see a real chance of a hike in May.
“With wage growth remaining stubbornly high and trimmed mean inflation well above the upper end of the RBA’s 2 per cent to 3 per cent target band, the case for further tightening remains strong,” argued Marcel Thieliant, head of Asia-Pacific economics at Capital Economics.
“We’re sticking to our forecast that the RBA will lift rates to 4.35 per cent by the second half of the year.” REUTERS
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