Australian unemployment unexpectedly rose in August, the first increase in 10 months, a result that supports the Reserve Bank’s signal of a potential shift to smaller interest-rate increases.
(Bloomberg) — Australian unemployment unexpectedly rose in August, the first increase in 10 months, a result that supports the Reserve Bank’s signal of a potential shift to smaller interest-rate increases.
The jobless rate’s rise to 3.5% came even as employment advanced by 33,500, the Australian Bureau of Statistics said Thursday. That was slightly below economists’ estimates for a 35,000 increase.
While the consensus estimate was for unemployment to hold at a 48-year low of 3.4%, Goldman Sachs Group Inc, Deutsche Bank AG, AMP Capital Markets and Bloomberg Economics were among those predicting an increase.
The result follows a surprise drop in employment in July, with a solid labor market having underpinned the RBA’s confidence in rapidly raising rates. Governor Philip Lowe recently gave himself some flexibility to shift to a slower pace of hikes, becoming an outlier among G-10 currency nations.
This “was the only domestic data release important enough to potentially alter the RBA’s recent more neutral policy guidance ahead of the October board meeting,” said Faraz Syed, an economist at Citigroup Inc.
“The failure of the data to show a strong boost in employment and the small rise in the unemployment rate means that the RBA can hold the view that cash rate rises can slow.”
The RBA is in the midst of its fastest tightening cycle in a generation, hiking by a half percentage point this month to take the cash rate to 2.35%. Economists expect the central bank will now move in slower quarter-point increments and pause at around 3%.
What Bloomberg Economics Says…
“Volatility in Australia’s unemployment rate is masking a shift in the labor market — one that should allow the Reserve Bank to reduce the pace of tightening this year.”
— James McIntyre, economist
For the full note, click here
Economists at Commonwealth Bank of Australia, the nation’s largest lender, expect unemployment to increase further toward 4% over the next year as a return of international workers boosts labor supply while slowing economic momentum weighs on demand.
Today’s jobs report also showed:
- The labor force participation rate — the share of the population that is working or looking for jobs — advanced to 66.6% from 66.4%
- Underemployment fell 0.1 percentage point to 5.9% and underutilization held unchanged at 9.4%
- Full-time roles jumped by 58,800 while part-time positions fell by 25,300
- Monthly hours worked increased by 0.8%
(Updates with comments from economists.)
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