Trading Guide: Australia's Employment Report

What is this report all about?

Australia’s employment change figure shows the change in the number of people who have jobs during the month prior to the release. In other words, this report keeps track of whether jobs were created or lost in that period.

As such, the employment report is considered a leading indicator for spending and overall growth. After all, job creation usually leads to higher consumer spending, which comprises as huge chunk of economic activity.

What are analysts expecting to see this month?

Analysts are looking for a net of 15,000 jobs created in January after a net of 22,600 workers lost jobs in December. It won’t be enough to drag unemployment rate lower though, so many are still expecting a jump from 5.8% to 5.9%. The participation rate is expected to remain at 64.6%.

How does AUD/USD usually react?

Back in December AUD/USD fell by around 40 pips when Australia’s jobless rate went up from 5.7% to 5.8%. Luckily for the bulls, the uptick was mostly expected and the employment change was twice as many as the estimates. The Aussie eventually recouped its losses and traded in a tight range until the U.S. session.

Traders weren’t so forgiving last month. Australia’s jobless rate remained at 5.8% but the employment change in December not only missed estimates but also wiped out November’s gains. As a result, AUD/USD dropped by 100 pips at the report’s release and stayed at the area until the end of the day.

Tips and tricks:

Pay more attention to employment change. Based on the charts above AUD/USD reacts more to surprises and changes in the number of work created or lost than the unemployment rate.

Prepare for disappointment. In five out of the last six releases, Australia’s employment change printed below its estimates.

Consider the market environment. AUD/USD showed limited price action in December because many traders were already on vacation. The Aussie’s reaction was more pronounced in January’s release when overall trading volatility was high. Coincidence? I think not!

AUD/USD doesn’t do follow-throughs. AUD/USD’s initial reaction doesn’t usually carry on to the succeeding trading sessions. Take note of other catalysts, such as this Thursday’s ECB monthly bulletin or the US retail sales that could influence the Aussie’s price action.