AUD: Weak labour market - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the Australia’s labour data was not alarmingly weak as total jobs fell -10K and were modestly weaker than expected (+15K) while the unemployment rate (5.6%) fell to a low since 2013, better than 5.7% expected.

Key Quotes

“However, the RBA October policy minutes and RBA Governor Lowe speech released on Tuesday this week noted that the RBA was paying more attention to the underlying features of the data revealing more slack in the labour market.  They noted a rising measure of under-employment reflected in rising part-time employment and falling full-time employment.  The data for September on Thursday suggested this trend accelerated, raising the probability that the RBA may consider further easing policy.

Under-employment (that captures part-time workers that want full-time work and others that are employed below their skill level) has been around 9.1% since Q3-2014, a record high.  The sum of under-employment and unemployment is lower in the last 18 months by virtue of a lower unemployment rate, but it rose in Q3, and remains relatively high over a long term comparison.  Furthermore, the participation rate has resumed falling in the last two months to be around the low end of its range since 2006, suggesting discouraged workers have left the workforce.

Considering these underlying elements, the data was significantly weaker than expected.  It may not be enough to move the RBA to cut rates again.  It may prefer to give the economy more time to adjust as the downswing from mining investment runs its course, but it does place more pressure on the RBA to consider a cut, especially if the CPI data next week fail to show underlying inflation stabilizing after its sharp fall in the first half of the year.”