Australia created 26,100 jobs in March, reversing 3 months of poor or disappointing jobs growth. Australia’s unemployment rate dropped from 5.8% to 5.7%, beating economists’ expectation of a rise to 5.9% on expectations of a higher participation rate (which in fact remained steady at 64.9%). However, all the growth came from part-time jobs, which increased by 34,900 to 372,900 while full-time employment fell by 8,800 to 8,180,400. As a result, monthly hours worked in all jobs decreased 17.5 million hours to 1,632.3 million hours.
The numbers caused 10 year bond yields to rise by around 4bps-5bps and prices in the cash market moved to imply a lower level of confidence in the likelihood of rate cuts in 2016. The chance of a rate cut by August this year is now back to 70% and the month in which one rate cut has been fully factored in has been pushed out to December.
NAB said, “It’s clear the labour market has improved over the past year” while Justin Fabo from ANZ described the jobs figures as “strong”, saying there was no chance of a RBA rate reduction in the near term. Nomura no longer expects a rate cut in May and has pushed its rate cut call back to November.