The overall trend of a falling unemployment rate remains intact as the Australian economy keeps on producing new jobs. While economists expect the rate of job creation to fall, the current rate has driven the unemployment rate below 5% for the first time since 2011. However, various economists, as well as the RBA, are struggling to reconcile a robust labour market with other economic reports which are suggestive of a weakening economy.
The ABS has now released employment estimates for February. The report indicates the total number of people employed in Australia increased by just 4,600 but, even so, the unemployment rate ticked down from 5.0% to 4.9%. ANZ senior economist Felicity Emmett described the report as “a setback for growing expectations of an interest rate cut…” and noted, “leading indicators point to further employment growth, albeit at a slower pace.”
Market expectations prior to the report’s release were for 15,000 new positions to be created and for the unemployment rate to stay at 5.0%. Financial markets reacted in an inconsistent fashion as local bond yields fell while the Aussie dollar jumped. By the end of the day, 3-year ACGB yields had lost 2bps to 1.42% while 10-year and 20-year yields each had fallen by 6bps to 1.88% and 2.35% respectively. The Aussie dollar initially jumped from 71.15 US cents to 71.65 US cents and then finished the afternoon session at around 71.45 US cents.