The ABS released the October Labour Force figures which came in at a seasonally adjusted +58.6k, significantly higher than market expectations of a +15k increase. The local bond market saw an immediate jump in yields with 10 year yields rising sharply to just short of 3%, a full 9bps higher. Cash markets reacted sharply, sending the odds of two rate cuts next year back to zero and reducing the odds of one rate reduction next year from 100% back to 80%. The Aussie dollar rose nearly US1 cent against the greenback as markets factored in higher future interest rates.
The unemployment rate fell 0.3% to 5.9% while the participation rate rose 0.1% to 65.0% and the breakdown of the +58.6 jobs saw a rise of 40k full time jobs and an increase of 18.6k in part-time jobs. Total employment increased by 2.7% in the year to October. Seasonally adjusted monthly hours worked in all jobs increased by 19.1m hours in October 2015 to 1,660.4m hours, or by approximately 1.2% for the month and 2.8% for the year.
Justin Fabo of ANZ called it “startling strength” and while acknowledging the controversy regarding the data’s accuracy he said other indicators supported the idea of a growing jobs market. “While undoubtedly there is some noise in today’s data, underlying jobs growth has been strong for a run of months. Non-ABS labour market indicators have been solid/strong for some time, so today’s numbers might indicate some catch-up to those.”
ANZ has been forecasting two rate cuts next year but the latest data has placed those forecasts in doubt. “Perhaps the labour market is even better currently than we thought. If so, achieving a cash rate cut by February looks less likely at this stage.” UBS, Goldman’s and Macquarie have all removed their call of a cash rate cut this year. AMP’s Shane Oliver say there is now zero chance of a December rate cut with 2016 “line ball”.
The states with the lowest rates of unemployment were NSW (5.5%) and Victoria (5.6%) with NSW continuing its role as the largest employer of Australians. W.A went backwards, with the state’s unemployment rate rising from 6.1% to 6.4% while the state with the highest unemployment rate remains South Australia with 7.5%, although it has come down from the previous month’s rate of rate of 7.7%.
