Thursday 23rd January 2020
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Australian unemployment unexpectedly declined in December as the labor market persisted in defying a sluggish economy, prompting a surge in the currency as traders slashed bets on an interest-rate cut. The jobless rate declined to 5.1%, compared with economists estimates for it to hold steady at 5.2%. Employment rose by 28,900 people -- almost triple estimates -- while participation remained at 66%. Bushfires resulted in “disruption to data collection” in New South Wales, Victoria and the A.C.T.
The currency jumped more than half a percent as traders are now pricing in just a 25% chance of a rate cut next month, from more than 50% late Wednesday. The data extend a three-year run of hiring strength that has withstood volatility offshore and a slowdown at home.
Yet the job market’s health has failed to significantly push unemployment down to a level that would spark faster wages growth as it coincided with a swelling labor force. This led the Reserve Bank of Australia to cut rates three times since June to try to buttress investment and drive faster economic growth. “These labor market figures will be interpreted in a positive manner,” said Callam Pickering, an economist at global jobs website Indeed Inc. who previously worked at the central bank. “However, with the bushfires likely to disrupt economic activity, and the with the Reserve Bank already leaning toward cuts, we expect further easing in the months to come.”
The Australian dollar surged to 68.79 U.S. cents following the report, up 0.6% from before the release. It was trading at 68.76 U.S. cents at 1:57 p.m. Sydney. Indeed, the rise in employment was solely part-time, with full-time positions falling by 300, suggesting Christmas-related hiring. New South Wales and Victoria, the most populous states, led the employment gains, with 20,600 and 10,300 respectively; The mining hub of Western Australia, which has struggled since the end of the resources boom, led losses with 5,300; Under-employment held at 8.3%.
Governor Philip Lowe’s policy easing has so far delivered few results outside reinvigorating house price growth. He maintains “long and variable lags” in monetary policy mean it will take time for stimulus to work its way through the economy.
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