Australia’s Unemployment Rate holds steady at 4.7%, as expected
Australia’s Unemployment Rate stayed at 4.7% in September, according to the official data released by the Australian Bureau of Statistics (ABS) on Thursday. The figure came in above the market consensus of 4.6%.
Furthermore, the Australian Employment Change arrived at -39.3K in September from a rise of 39.5K in August, compared with the consensus forecast of a 20K increase.
The participation rate in Australia decreased to 66.8% in September from 67.0% in August (revised from 67.1%). Meanwhile, Full-Time Employment increased by 34.4K in the same period from a decline of 6.3K in the previous reading. The Part-Time Employment fell by 73.7K in September versus a rise of 45.8K prior.
Sean Crick, ABS head of labour statistics, said with the key highlights noted below
This September a higher proportion of people remained unemployed compared to recent years.
This follows from last month when a higher proportion of people who were previously not in the labour force moved to being unemployed.”
The number of part-time hours worked fell 1.5 per cent this month, with full-time hours worked rising by 0.4 per cent.
Market reaction to the Australia’s employment data
The Australian Dollar (AUD) attracts some sellers following the employment data. At the time of writing, the AUD/USD pair is trading 0.24% lower on the day to trade at 0.6954.
Australian Dollar Price This week
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the weakest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | -0.01% | -0.17% | -0.46% | 0.24% | 0.09% | 0.15% | |
| EUR | 0.01% | 0.07% | -0.19% | -0.42% | 0.24% | 0.14% | 0.20% | |
| GBP | 0.00% | -0.07% | -0.31% | -0.49% | 0.15% | 0.07% | 0.10% | |
| JPY | 0.17% | 0.19% | 0.31% | -0.16% | 0.52% | 0.29% | 0.43% | |
| CAD | 0.46% | 0.42% | 0.49% | 0.16% | 0.70% | 0.46% | 0.62% | |
| AUD | -0.24% | -0.24% | -0.15% | -0.52% | -0.70% | -0.10% | -0.03% | |
| NZD | -0.09% | -0.14% | -0.07% | -0.29% | -0.46% | 0.10% | 0.03% | |
| CHF | -0.15% | -0.20% | -0.10% | -0.43% | -0.62% | 0.03% | -0.03% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
This section below was published at 20:30 GMT on Wednesday as a preview of the Australia Employment report
- The Australian Unemployment Rate is set to remain at a five-year high of 4.6% in September.
- Australia’s Employment Change is expected to have added 20K jobs in the month, after gaining 39.5K in August.
- AUD/USD battles the 0.7000 psychological barrier as RBA flags more rate hikes.
The Australian Bureau of Statistics (ABS) will publish the September employment report on Thursday at 00:30 GMT.
The Australian Dollar (AUD) could see a big reaction to the jobs data if the numbers significantly alter market expectations for another interest rate hike by the Reserve Bank of Australia (RBA) later this year.
What to expect from the Australian Unemployment Rate?
The Australian economy is expected to have added 20,000 jobs in September. Net employment rose by 39,500 in August, rebounding from a July decline of 15,900.
Meanwhile, the Unemployment Rate is expected to remain at a five-year high of 4.6% in the same period. Details of the report are likely to show that the Participation Rate ticked a tad lower to 67% from 67.1% prior.
Market participants will also watch the breakdown of full-time and part-time positions.
A potential weakness in the labor market and a slowdown in wage growth are unlikely to temper bets for at least one more rate hike this year. Markets are currently pricing in about a 33% chance that the RBA will raise rates in November, according to the Australian Securities Exchange (ASX) RBA Rate Tracker.
The Australian central bank raised interest rates for the fourth time this year in September to a 15-year high of 4.6%, and flagged further tightening, if needed.
On the labor market, the RBA said that its “conditions have eased broadly as expected in recent months, and labour market leading indicators are broadly stable.”
RBA Governor Michele Bullock, during her post-monetary policy meeting press conference, emphasized that “unemployment rate still low historically,” adding that she still thinks “the labor market is a little bit tight.”
Soon after the September policy decision, the Australian Consumer Price Index (CPI) data was published, showing that the trimmed mean measure of core inflation increased by 0.2% month-on-month in August, leaving the annual pace steady at 3.6% for a third consecutive month.
With inflation showing no signs of easing, despite a run of rate increases this year, further tightening remains on the table unless the labour market weakens significantly.
How could the Australian employment report affect AUD/USD?
An unexpected dip in the Unemployment Rate alongside stronger-than-expected job gains could boost November RBA rate-hike bets, provide the much-needed impetus to the currency and strengthen the AUD/USD recovery beyond the 0.7000 level.
Conversely, a surprise rise in unemployment, combined with weaker job growth, could prompt markets to price out a November interest rate increase, weighing heavily on the Aussie.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, highlights key technical levels for trading AUD/USD following the labor data:
“AUD/USD keeps a bearish near-term tone as spot holds beneath a dense cluster of moving averages. The 21-day Simple Moving Average (SMA) at 0.7013 is the first cap just overhead, while the 100-day and 200-day SMAs at 0.7044 and 0.7042, respectively, reinforce a broader topside barrier, with the 50-day SMA further up at 0.7086. The Relative Strength Index (14) around 47 has recovered from oversold territory but still hints at only modest momentum, suggesting that bounces are likely to be limited while price remains under these key trend markers.”
“On the downside, with no clear moving-average or structural supports defined by the provided dataset, traders will likely look to recent lows near 0.6950 and the psychological 0.6900 mark as potential demand zones.”
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Author
FXStreet Team
FXStreet
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