(Bloomberg) -- Australia’s unemployment rate unexpectedly climbed as more people sought work, underscoring a large amount of slack in the labor market.
Key Insights:
- Australia’s central bank has made it clear that unemployment needs to fall further from 5% -- where it’s hovered for around six months -- to help return inflation to target and stave off an interest-rate cut
- Jobs has been a key factor in the Reserve Bank’s resistance to resuming rate cuts after a 2-1/2 year hiatus. It’s been puzzled by a disconnect between strong hiring and weakening economic growth that has similarly flummoxed policy makers in other developed economies
- Should unemployment fall, the RBA will retain its room for maneuver, particularly given the government and main opposition are offering tax cuts and other spending ahead of this weekend’s election. Commonwealth Bank says the stimulus would be equivalent to two quarter-point rate cuts
- The April jobs report could have been impacted by public holidays that fell in the month -- as well as caution ahead of the election
- One explanation for labor market resilience to a slowing economy is that much of the hiring has been government related. However, a private gauge of employment this week slumped to the lowest level since 2016, signaling the market’s prolonged strength might have run its course
Market Reaction
- The Aussie dollar fell to 69.09 U.S. cents at 11:35 a.m. in Sydney from 69.23 cents pre-data
To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net
To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke, Victoria Batchelor
©2019 Bloomberg L.P.
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