Robust Australian employment in March suggests RBA could rise further By Reuters
© Reuters. FILE PHOTO: People silhouette in front of the Sydney Opera House at sunset in Australia, November 2, 2016. REUTERS/Steven Saphore/File Photo
By Stella Qiu
SYDNEY (Reuters) – Australia’s employment beat expectations for a second month in March while the jobless rate held near a 50-year low, a stark report that suggests the campaign to central bank tightening may not be over yet.
Figures from the Australian Bureau of Statistics showed on Thursday that net employment rose by 53,000 in March from February, when it rebounded by 63,600, sharply but slightly revised down. Market forecasts were for a rise of 20,000, after several months of seasonal volatility.
The jobless rate held steady at 3.5%, while analysts had expected a rise to 3.6%. Full-time employment jumped 72,200, after a strong increase of 74,900 the previous month, an encouraging sign for household income.
The local dollar rose 0.2% to $0.6707, three-year bond futures slipped 7 ticks to 97.06, and markets moved to a slightly higher 18% probability for a 25 basis point hike at the next Reserve Bank of Australia meeting in May.
“There are very few signs of weakness in this data and little to suggest that the labor market is slackening significantly,” said Sean Langcake, head of macroeconomic forecasts for BIS Oxford Economics.
“This confirms our expectation that the first quarter CPI print will be strong, and we expect to see the RBA raise rates again in May.”
Keen to preserve strong job gains, the RBA paused rate hikes in April to gauge the impact of the tightening so far, though that could mean a slower return to its inflation target compared to other major economies.
Governor Philip Lowe said the pause did not mean the hikes were over and the monthly stream of data would determine whether the central bank will have to change interest rates again.
A major relief for policymakers is the risk of a damaging price-wage spiral in the country which has remained weak, with wage growth still well below searing inflation, which has shown signs of peaking. .
Thursday’s data showed the labor force participation rate held at record highs at 66.7%, suggesting labor supply is growing to meet demand, thanks to the influx more women and migrants in the labor market, reducing the upward pressure on wages.
Vacancies fell from high levels for the third consecutive quarter in February, but still well above pre-pandemic levels, a sign of a still tight labor market.