Australia’s robust March employment suggests RBA may hike again
SYDNEY – Australia employment blew past expectations for a second month in March while the jobless rate held near 50-year lows, an unambiguously strong report that suggests the central bank’s tightening campaign may not be over yet.
Figures from the Australian Bureau of Statistics showed on Thursday net employment rose 53,000 in March from February, when they rebounded by a steep but slightly downwardly revised 63,600. Market forecasts had been for a rise of 20,000, following several months of seasonal volatility.
The jobless rate stayed at 3.5 percent, when analysts had looked for a nudge up to 3.6 percent. Full-time employment surged by 72,200, after a hefty increase of 74,900 the previous month, an encouraging sign for household income.
The local dollar rose 0.2 percent to $0.6707, three-year bond futures slid 7 ticks to 97.06, and markets moved to price in a slightly higher chance of 18 percent for a 25 basis point hike when the Reserve Bank of Australia next meets in May.
“There are very few signs of weakness in these data and little to suggest the labor market is slackening in a meaningful way,” said Sean Langcake, Head of Macroeconomic Forecasting for BIS Oxford Economics.
“This affirms our expectation that the Q1 CPI print will be a strong one, and we expect to see the RBA raising rates again in May.”
Keen to preserve the strong job gains, the RBA paused its rate hikes in April to assess the tightening impact so far, even though that could mean a slower return to its inflation target when compared with other major economies.
Australia pauses rate hikes to assess tightening impact on inflation
Governor Philip Lowe said the pause did not imply hikes were over and monthly flow of data would determine whether the central bank will need to move again on interest rates.
A major relief for policymakers is the risk of a damaging price-wage spiral in the country remained low, with wage growth still way below red-hot inflation, which has showed signs of peaking.
Thursday’s data showed the participation rate held near record-levels at 66.7 percent, suggesting the supply of labor is rising to meet demand, thanks to more women and migrants entering the workforce, which lessens the upward pressure on wages.
Job vacancies have eased from elevated levels for the third straight quarter in February, but still far above pre-pandemic levels in a sign of a still tight labor market.
