Australia’s unemployment rate drops unexpectedly as labor market remains tight By Reuters

SYDNEY (Reuters) – Australia’s unemployment rate saw a shock drop to an eight-month low in November, while employment rose more than forecast, evidence that the labor market is far more resilient than expected.

The figures prompted markets to cut bets on easing in February after the Reserve Bank of Australia unexpectedly turned dovish on Tuesday, opening the door to an interest rate cut.

The Australian dollar rose 0.6% to $0.6409, while three-year futures fell 7 notches to 96.192. The swaps now imply a 55% chance of a reduction in February, compared to 68% previously.

Data from the Australian Bureau of Statistics on Thursday showed the unemployment rate fell to 3.9% in November from 4.1% in October, confounding analysts who had been looking for a rise to 4.2%. The participation rate fell to 67.0%, from 67.1%.

Net employment rose by 35,600 in November from October, when it rose by a revised 12,200. That was above market forecasts for a gain of 25,000, while annual job growth slowed just slightly to 2.4%.

“In November we saw a higher number of people taking jobs than usual who were unemployed and (were) waiting to start work in October,” said David Taylor, the ABS’s head of labor statistics.

“It contributed to the increase in employment and the decrease in unemployment.”

The RBA has held policy steady for a year now, estimating that the current cash rate of 4.35% – up from 0.1% during the pandemic – is restrictive enough to bring inflation to the 2-3% target range while preserving employment growth.

Governor Michelle Bullock mentioned the jobs report as one of several data releases — including inflation and retail sales data — that the central bank will monitor before its next meeting in February.

The data showed that economic growth in the third quarter was surprisingly weak, defying expectations for a recovery. Wage growth has also moderated, suggesting that unemployment may not need to rise in order for inflation to remain entrenched.

The jobs report showed that the number of hours worked was unchanged in November, while the underemployment rate fell by 0.1 percentage point to 6.1%.