Australia’s period of a falling unemployment rate may have come to an end but then again, it may be just another hiccup. After falling below 5% in late 2018, Australia’s jobless rate remained around that mark though early 2019 until it moved higher in the June quarter and then hit 5.3% in August. However, recent leading indicators have been generally pointing towards further softness and more than a few economists expect the RBA to cut the cash rate again shortly, something the central bank does when it expects unemployment to rise.
The latest Labour force figures have now been released and they indicate the number of people employed in Australia grew despite a lower proportion of the population either working or looking for work. The report shows the total number of people employed in Australia increased by 14,700 in September while the unemployment rate improved from 5.3% to 5.2%.
Morgan Stanley Australia Equity Strategist Chris Read said, “This release reduces the near-term pressure on the RBA to cut rates further, given that it moves the unemployment rate back in line with its forecast, although those forecasts still incorporate another rate cut.”
Market expectations prior to the report’s release were for 15,000 new positions to be created and for the unemployment rate to remain at 5.3%. However, investors and traders reacted to a lower underemployment rate by sending yields higher while trimming expectations of official rate cuts. By the end of the day, 90-day bank bills had increased by 3bps to 0.88%, the yield on 3-year ACGBs had gained 4bps to 0.73% while 10-year and 20-year yields each finished 6bps higher at 1.11% and 1.52% respectively.