Australia created 300 jobs (net) in February, continuing a poor run of jobs growth in the past 3 months and delivering mixed news for the RBA on interest rates. The good news is there were 15,900 full time jobs created and the headline unemployment rate dropped from 6.0% to 5.8%. However 15,600 part time jobs were shed and a closer look at the numbers suggest the drop in unemployment was a result of around 27,000 people stopped looking for work. The participation rate moved from 65.1% to 64.9%.
The numbers caused 10 year bond yields to drop by around 8bps -10bps and prices in the future cash rate market moved to imply a greater level of confidence in the likelihood of rate cuts in 2016. The chance of a rate cut by November this year is now priced as a certainty.
Adding to the cloudy employment numbers was the seasonally adjusted monthly hours worked in all jobs which fell 0.1% to 1,652.6m hours, which is +2.0% over the last 12 months.
Here’s what the economists thought:
ANZ economist Dylan Eades:
“…the decline in the unemployment rate to 5.8% suggests that underlying conditions in the labour market remain relatively healthy and will be sufficient to keep the RBA on the sidelines for the time being…today’s data puts at risk our call for a May rate cut.”
CBA chief economist Michael Blythe:
“Net, net I would say it is a positive number in terms of the economic outlook. It’s still pretty much the case the unemployment rate is trending lower at the moment. That’s a pretty powerful signal about the economy and is certainly a message for the Reserve Bank as well…so no need for further rates assistance.”
JPMorgan economist Tom Kennedy:
“The participation rate has been moving higher for some time so for it to flick lower today is a little bit odd. We aren’t putting too much emphasis on that and we do think we’ll see a recovery in the participation rate going forward.”
RBC Capital Markets strategist Michael Turner:
“We suspect the unemployment rate will be sticky around 6.0% for most the year. We are still in the camp of two rate cuts in the second half of the year, but you’d need unemployment ticking a bit higher than 5.8%.”
