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Australian employment rebounded in March, recovering from a one-off dive the previous month, while the unemployment rate came in slightly below forecasts, showing a labour market that remains healthy but does not stand in the way of policy easing.
Swaps imply a quarter-point rate cut from the Reserve Bank of Australia has been fully priced in for May, with some risk – about 25% – of a larger half-point move as U.S. tariffs fuelled fears of a global recession.
Figures from the Australian Bureau of Statistics on Thursday showed net employment rose 32,200 in March from February, when it dropped by a revised 57,400. That was just under market forecasts for a 40,000 rise.
The jobless rate ticked up to 4.1%, from 4.0%, but was still under forecasts of 4.2%, and similar to where it has been for the past year.
The RBA had not expected further loosening in the labour market, tipping unemployment to peak at 4.2% this cycle.
“The solid bounce back in March indicates that the Australian labour market remains more resilient than many expected, including the RBA,” said Tony Sycamore, analyst at IG.
“Nonetheless, given the downside risks to global growth and softer near-term inflation profile, we expect the RBA to… cut rates by 25bp at its meetings in May and in July.”
The RBA held interest rates steady at 4.1% earlier this month, but said the May meeting would be a good opportunity to revisit policy. It categorised the surprise fall in employment as representing some volatility in the data series.
The RBA will have the results of the quarterly inflation report and one more jobs report before its May 19-20 meeting. The closely watched CPI report is expected to show the trimmed mean measure returned to the target band of 2-3%.
The March employment report showed hours worked fell 0.3% in the month as bad weather struck parts of the country, while the participation rate rose to 66.8% from 66.7%.
(Reporting by Stella Qiu and Wayne Cole; Editing by Himani Sarkar and Jamie Freed)
