Australia’s jobless rate stays low as hiring gains persist

AUSTRALIA’S unemployment rate remained low in December as the economy extended a streak of hiring gains, underlining the labour market’s unusual resilience to elevated interest rates.

The jobless rate rose to 4 per cent, as expected by economists, Australian Bureau of Statistics data showed on Thursday (Jan 16). Employment jumped by 56,300 – driven entirely by part-time roles – versus a forecast 15,000 gain.

The Australian dollar edged higher after the data while policy sensitive three-year government bond yields were little changed. Traders maintained expectations the Reserve Bank of Australia (RBA) will make its first cut in April, while paring the chance of easing in February to roughly two-thirds from more than 70 per cent.

“Australia’s labour market remains incredibly tight,” said Callam Pickering, Apac economist at global job site Indeed. Pickering noted that full-time employment has accounted for two-thirds of employment gains over the past year, suggesting the economy continues to create a lot of high-quality and well-paying jobs.

“This sort of labour market strength, coupled with what is otherwise a weak economy, will give the RBA plenty to think about when they meet in February,” he added.

Australia’s resilient jobs market has provided ongoing reassurance to RBA governor Michele Bullock that the economy is still on a “narrow path” to a soft landing. The RBA made a surprising dovish tilt last month, expressing greater confidence that inflation is on track to return to the 2 to 3 per cent target in a timely manner.

The US has seen similarly solid employment gains and overnight data showed American consumer price rose in December by less than forecast. That helped arrest a deep sell-off in bond markets and reinvigorated bets that the Federal Reserve will cut rates sooner than previously thought, following three reductions last year.

Australia’s jobs report together with quarterly inflation data due later this month and the RBA’s updated economic forecasts will be key inputs in the next policy decision.

“The strong labour force print increases the option value for the RBA in a February pause,” said Kenneth Crompton, a senior fixed income strategist at National Australia Bank in Sydney. “The inflation outlook, subject to the final Q4 print, of course, can certainly allow a cut but the apparent cessation of weakening in the labour market reduces the need to act soon.”

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The RBA has kept borrowing costs at a 13-year high of 4.35 per cent for the past 14 months to maintain pressure on consumer prices. That has weighed on the private sector of the economy with GDP barely registering any growth in the second and third quarters of 2024.

As a result, government spending and investment have been key supports to the economy and have also been a major driver of hiring in recent times.

Thursday’s jobs report also showed:

• Annual employment growth was 3.1 per cent.
• Full-time roles fell by 23,700 while part-time jumped by 80,000.
• The previous month’s headline employment gain was revised down to 28,200 from 35,600.
• Participation rate edged up to 67.1 per cent, a record high.
• Underemployment fell to 6 per cent.
• The employment-to-population ratio rose 0.1 percentage point to a new record of 64.5 per cent. BLOOMBERG