Australian unemployment drops as jobs surge; currency gains

AUSTRALIAN employment soared and the jobless rate dropped, highlighting the ongoing resilience of the nation’s labour market to restrictive monetary policy. The currency and bond yields advanced.

The economy added 116,500 roles in February – led by full-time jobs – almost three times the 40,000 gain forecast, government data showed on Thursday (Mar 21). Unemployment fell to 3.7 per cent from 4.1 per cent in January.

In response, the currency rose as much as 0.4 per cent to 66.15 US cents while yields on the policy-sensitive three-year government bond climbed to 3.68 per cent. Traders also trimmed bets on an August interest-rate reduction to 60 per cent from 80 per cent.

Bjorn Jarvis, ABS head of labour statistics, pointed out that February’s sharp gain followed a larger-than-usual number of people in December and January who had a job that they were waiting to start or to return to.

“This translated into a larger-than-usual flow of people into employment in February and even more so than February last year,” he said.

The Reserve Bank of Australia (RBA) this week held its key interest rate at a 12-year high of 4.35 per cent as it waits on data to signal a firm trajectory for the economy. Thursday’s job figures, together with monthly inflation out next week, will help further shape the policy debate after the RBA on Tuesday abandoned a hiking bias.

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The central bank raised borrowing costs by 4.25 percentage points between May 2022 and November 2023 to rein in surging consumer prices. While inflation remains elevated, it has been steadily cooling, encouraging bets on rate cuts.

First-quarter inflation is due next month, with economists expecting it will be lower than the 4.1 per cent reading for the final three months of 2023. The RBA’s latest forecasts show inflation only returning to its 2 to 3 per cent target in late 2025.

Thursday’s data showed annual jobs growth cooled to 3.2 per cent in February from 3.5 per cent a year earlier.

Looking ahead, the RBA – which characterises the labour market as still a bit tight – expects employment growth to slow, sending the jobless rate to 4.4 per cent by mid-2025. The central bank will publish updated forecasts in May.

Thursday’s labour data also showed:

• Underemployment edged down to 6.6 per cent and the underutilisation fell to 10.3 per cent from 10.8 per cent.

• The economy added 78,200 full-time roles and 38,300 part-time.

• The participation rate edged down to 66.7 per cent.

• The employment to population ratio increased to 64.2 per cent.

• Monthly hours worked rose by 2.8 per cent. BLOOMBERG