Australia's labor market cooled slightly last month, with only around 16,000 new jobs created in October, less than analysts had expected, according to the Bloomberg consensus. At the same time, the unemployment rate remained unchanged at 4.1%, but only because the participation rate fell slightly from 67.2 to 67.1%, Commerzbank’s FX analyst Volkmar Baur notes.
AUD to weaken in the coming months
“Despite the slowdown though, the level at which the labor market is operating remains very robust. The number of new jobs created has fallen below the pre-pandemic average of around 22,000 - but one should not read too much into a single figure. The three-month average is still above 40,000 new jobs.”
“And unemployment, at 4.1%, remains well below pre-pandemic levels, with the participation rate continuing to be very high. The unemployment rate for young people aged 15-19, who tend to be more sensitive to the business cycle, has even fallen to its lowest level in a year.”
“The Reserve Bank of Australia should feel vindicated in its hawkish stance earlier in the month when it left the cash rate unchanged at 4.35%. The market continues to take a similar view, pricing in the first rate cut only in the middle of next year. In my view, the risk is therefore more towards an earlier economic slowdown and a faster rate cut. The AUD should therefore tend to weaken in the coming months.”
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