After the surprise fall in Australia’s unemployment rate in September, economists had been expected some sort of reversal in October. In September, the participation rate had dropped from 65.7% to 65.4% and the total workforce had shrunk, thus producing the lowest unemployment rate since April 2012. Given the nature of statistical inference and sampling error, economists were expecting an increase in the participation and unemployment rates in the latest October report.
The ABS has released employment estimates for October which indicate the total number of people employed in Australia increased by 32,800 and the unemployment rate held steady at 5.0%. Westpac senior economist Justin Smirk described as a “sound update” and said, “it increases the risk that the unemployment rate could end this year with a ‘4’ handle” (under 5%).
Market expectations prior to the report’s release were for 20,000 new positions to be created and for the unemployment rate to slip back to 5.1%. Financial markets reacted by sending local bond yields and the Aussie dollar higher. 3-year ACGB yields finished the day 3bps higher at 2.18%, 10-year yields were 1bp higher at 2.72% and 20-year yields gained 2bps to 3.07%. The Aussie dollar initially jumped from 72.35 US cents to 72.70 US cents and settled there over the course of the afternoon.