Are Australia's March Job Figures Too Good to Be True?

One glance at the forex calendar shows more red than green these days so it’s a bit surprising to see impressive jobs figures from Australia. Hiring picked up by 37.7K in March, more than twice as much as the estimated 14.9K gain, which was enough to bring the unemployment rate down to 6.1%.

And that’s not all! The February reading was upgraded to show a 42K increase in hiring, a far cry from the initially reported 15.6K rise. To top it off, the jobless rate for that period was revised from 6.3% down to 6.2%.

Are these headline readings for real? Or does the underlying data paint a different picture?

Looking closer at the components of the latest report reveals that full-time employment actually jumped by 31.5K in March while part-time hiring increased by 6.1K, which confirms that a lot of jobs were really created during the month. Aside from that, the participation rate ticked up from 64.7% to 64.8%, indicating that more Australians have returned to the labor force to resume their job hunt. In other words, these figures suggest that labor conditions are looking brighter indeed!

But even with Aussie bulls partying after this stellar jobs release, I still can’t help but take the latest figures with a grain of salt. For one, the Australian Bureau of Statistics has pointed out that a lot of adjustments were made to account for seasonality and to recalibrate benchmarks to the latest population estimates. Now that’s too much statistical mumbo-jumbo for me but from what I gather, most of the positive revisions may have simply been based on changes in survey methodology.

Besides, with the way things are going in Australia lately, it seems that the economy might have a tough time sustaining these employment gains. Investment in the mining industry, which is one of the Land Down Under’s major sources of growth, has been tumbling along with commodity prices. Trade activity, particularly in terms of iron ore exports to China, also seems to be facing bleak prospects.

Not even RBA Governor Glenn Stevens himself is convinced that Australia’s labor situation is turning a corner since he already pointed out during their latest monetary policy statement that the economy is likely to operate with a degree of spare capacity for some time. With that, many forex market analysts are still expecting the central bank to announce another interest rate cut later on this year.

For now, it seems that a good number of forex traders trimmed their short Aussie bets after the jobs report was released. Do you think AUD/USD is in for a long-term reversal though?