Employment growth in Australia decelerated in October following a period of strong gains. However, the unemployment rate remained low, and underlying trends appeared stable, indicating limited urgency for interest rate cuts.
Data from the Australian Bureau of Statistics released on Thursday showed a net increase of 15,900 jobs in October, compared to a revised surge of 61,300 jobs in September.
This was the smallest monthly increase in seven months and fell short of market expectations for a 25,000 gain, though annual job growth remained robust at 2.7%. The increase was once again led by full-time positions.
Meanwhile, the unemployment rate held steady at a historically low 4.1%, where it has remained since April, while the participation rate dipped slightly to 67.1% from a record high of 67.2%, Reuters reports.
On Thursday, National Australia Bank (NAB) postponed its forecast for the Reserve Bank of Australia's first rate cut from February to May, citing the continued strength of the labour market.
Yet other major Australian banks still predict February as the beginning of the easing cycle.
“Given the data flow to date, it now looks unlikely the RBA will have enough confidence in the trajectory of inflation by then. There is a real risk that policy rates stay on hold even deeper into 2025,” according to a note by NAB analysts.
The market reaction was subdued, with the Australian Dollar holding steady at $0.6485 and three-year bond futures unchanged at 95.78. Markets continued to anticipate a likely first rate cut in May or July next year.
The Reserve Bank of Australia has kept policy steady for the past year, assessing that the current cash rate of 4.35%, up from 0.1% during the pandemic, is sufficiently restrictive to guide inflation back to its 2-3% target range while sustaining employment gains.
Given the unexpectedly strong labour market, the chances of a near-term rate cut are low. The central bank has indicated that monetary policy will remain restrictive until there is clear, sustainable progress toward its inflation target.
Headline inflation eased to 2.8% in Q3, primarily due to government-issued electricity rebates. However, underlying inflation stayed elevated at 3.5%.