ING Global Economics Team
ING Economic and Financial Analysis
Higher-than-forecast employment looks good, but the nature of that employment is questionable, and the unemployment rate has jumped higher - on balance, this looks slightly weaker than it first appears.
On the one hand
Employment growth of 38,500 was stronger than the consensus expectation for 23,700 job gains in April. But the good news ends there. Full-time jobs with their higher wages and other benefits fell by 6,100 and there was a small downward revision to the previous month's gains. Part-time employment growth made up all of the increase in the headline figure.
There was also a bigger-than-usual increase in the number of unemployed. Total unemployment rose by just over thirty-thousand in April. This was less than the increase in the labour force but was enough to push up the unemployment rate from an upward revised 3.9% to 4.1%, helped higher also by some convenient rounding (4.054% to 3dp). Labour participation rose to 66.7% from 66.6%, which equates to a 68,800 increase in those employed or looking for work. This is about double the 6-month average and points to a still fast-growing pool of available labour in search of a dwindling supply of quality jobs. It is early days yet, and this data is very choppy so reading anything much into a single month's data is extremely risky.
As a case in point, when looking at 6-month moving averages (see chart below), today's data really hasn't moved the needle regarding employment growth or the change in the number of unemployed.
Monthly employment and unemployment changes (6mma)
Source: CEIC, ING
RBA need more than this to deliver any cuts
As far as this affects Reserve Bank (RBA) rate policy, today's release is probably only of marginal relevance. Any softening in the labour data is still fairly speculative at this point, though the wage price data earlier in the week were a help if they really are pointing to a peak in wage growth. We will need to see a lot more than this if we want to see rate cut expectations for this year increase. And the inflation data so far isn't providing enough support. The outlook for RBA rates this year remains cloudy. A year-end cut is still possible, but only if this labour data softens more meaningfully than this and the inflation run-rate drops significantly, and soon.
Read the original analysis: Australia: Mixed news from the labour front
Content disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more here: https://think.ing.com/content-disclaimer/
Recommended Content
Editors’ Picks
AUD/USD: Outlook is still bearish below 0.6630
AUD/USD extended its gains from Wednesday, supported by continued selling pressure on the US Dollar. However, weak performance in the commodities market and disappointing Chinese PMI data limited the Australian dollar's upward potential.
EUR/USD extends upside above 1.0850, with all eyes on US NFP data
The EUR/USD pair extends the rally to 1.0885 during the early Asian session on Friday. The uptick of the major pair is bolstered by the weakening of the US Dollar. All eyes will be on the US Nonfarm Payrolls, which is due later on Friday.
Gold retreated sharply, trades around $2,740
Prices of Gold trade markedly on the defensive on Thursday following a marginal uptick in the Greenback and declining US yields. Despite the daily pullback, the yellow metal is anticipated to remain bolstered by steady uncertainty pre-US election.
Maker Price Forecast: MKR could stage 40% rally
MakerDAO is up 2% on Thursday and could be set for a 40% rise in the coming weeks if it successfully maintains an extended move above the descending trendline of a falling wedge. On-chain data also supports the bullish outlook after a four-month-long decline.
Bank of Japan holds rates steady amid signs of modest GDP growth
Monthly industrial production results have been mixed but generally indicate a modest recovery in third-quarter GDP. Clear guidance from the Bank of Japan remains elusive, with each upcoming meeting being pivotal.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.