Australia’s Unemployment Rate steadies at 4.1% in October vs. 4.1% expected

13 Nov 2024, 20:30 by FXStreet Team · FXStreet

Australia’s Unemployment Rate came in at 4.1% in October, according to the official data released by the Australian Bureau of Statistics (ABS) on Thursday. The figure was stable compared with the previous month's figure and came in line with the market consensus of 4.1%.

Furthermore, the Australian Employment Change arrived at 15.9 K in October from 61.3 in September (revised from 64.1K), compared with the consensus forecast of 25.0K.

The participation rate in Australia declined to 67.1% in October, compared to 67.2% in September. Meanwhile, Full-Time Employment increased by 9.7K in the same period from 48.8K (revised from 51.6K) in the previous reading. The Part-Time Employment increased by 6.2K in October versus 12.5K prior.

Bjorn Jarvis, ABS head of labour statistics, said with the key highlights noted below

"This [the unemployment rate] is around 0.6 percentage points above its recent low of 3.5% in June 2023, but is 1.1 percentage points below March 2020, when it was 5.2%.”

“The number of unemployed people in October was 67,000 higher than a year ago, but was still 82,000 people lower than in March 2020.”

“While employment grew in October, the 0.1% increase was the slowest growth in recent months. This was lower than each of the previous six months, when employment rose by an average of 0.3% per month.”

AUD/USD reaction to the Australia Employment report

The Australian Dollar posts modest gains in an immediate reaction to the Australian Employment report. The AUD/USD pair is trading at 0.6494, adding 0.20% on the day.

This section below was published at 20:30 GMT on Thursday as a preview of the Australia Employment report

The Australian Unemployment Rate is foreseen stable at 4.1% in October.
Employment Change is expected at 25K, much lower than the 51.6K posted in September.
AUD/USD is under pressure and may soon pierce the 0.6500 mark.

The Australian Bureau of Statistics (ABS) will release the October monthly employment report at 00:30 GMT on Thursday. The country is expected to have added 25K new job positions, while the Unemployment Rate is expected to remain stable at 4.1%. The Australian Dollar (AUD) trades near multi-week lows against the US Dollar (USD) ahead of the event amid continued USD demand, with the AUD/USD pair trading just above the 0.6500 mark.

The ABSEmployment Change report separates full-time from part-time jobs. According to its definition, full-time jobs imply working 38 or more hours per week and usually include additional benefits, but they mostly represent consistent income. On the other hand, part-time employment generally offers higher hourly rates but lacks consistency and benefits. This iswhy full-time jobs have more weight than part-time ones when setting the directional path for the AUD.

The September report showed the Oceanic country created 51.6K full-time jobs and 12.5K part-time positions, resulting in a net Employment Change of 64.1K. The Unemployment Rate, in the meantime, printed at 4.1% for a second consecutive month.

Australian Unemployment Rate seen steady in October

Market analysts anticipate that the Unemployment Rate will remain steady at 4.1% in October. Ahead of employment figures, Australia released some good news related to the sector: Australian wage growth slowed in the third quarter of the year, according to the quarterly Wage Price Index report. The index advanced at an annual pace of 3.5% in the three months through September, easing from the 4.1% posted in Q2, also below the 3.6% expected. On a quarterly basis, wages were up 0.8%, matching the previous quarter’s figure and slightly below the 0.9% anticipated. Wage data indicate easing inflationary pressures as quarterly gains are the lowest in two-and-a-half years.

Wage-related inflation is relevant amid its impact on the Reserve Bank of Australia (RBA) monetary policy decisions. The central bank has held the Official Cash Rate at 4.35% since late 2023 amid the slow pace of disinflation and overall labor market resilience.

The central bank aims for inflation to stay between 2% and 3%. The annualised Wage Price Index at 3.5% may be encouraging, but it is still hotter than “comfortable.”

With that in mind, easing wage inflation coupled with an around 4% Unemployment Rate is enough to support the generalised idea of an initial RBA interest rate cut as early as February 2025, albeit not enough to think about an earlier trim.

Regarding job creation, the country has been solidly adding full-time positions in the last couple of months, and while it may sound positive for the economy, it also means the labor market remains tight, opposite to the RBA’s desired loosening.

Generally speaking, substantial full-time job creation is seen as tighter. At the same time, an increase in part-time positions could be more encouraging regarding upcoming interest rate cuts.

In the meantime, recent developments in the United States (US) could affect the upcoming RBA’s decision. The world’s largest economy held a presidential election and former President Donald Trump’s victory paints a new global scenario for the next four years.

Trump has pledged to establish tariffs, which may affect the performance of every other major economy interacting with the US. RBA Governor Michele Bullock noted last week that Trump’s presidency could send inflation in different directions in her appearance before a Senate committee.

At the same time, Bullock noted that, at this point, the RBA maintains its inflation forecast, indicating that price pressures won’t fall significantly within the target band until 2026.

When will the Australian employment report be released and how could it affect AUD/USD?

The ABS will publish the October employment report early on Thursday. As previously stated, Australia is expected to have added 25K new job positions in the month, while the Unemployment Rate is foreseen at 4.1%. Finally, the Participation Rate is expected to hold at 67.2%.

Generally speaking, a strong report will boost the AUD, even if the larger increase comes from part-time jobs. Any weak underlying subcomponent will likely fuel hopes of rate cuts, but not enough to trigger an AUD sell-off. The opposite case is also valid, with soft figures putting pressure on the Aussie.

Ahead of the announcement, the AUD/USD pair trades a handful of pips below the 0.6500 mark and is technically bearish as the USD maintains the post-election momentum.

Valeria Bednarik, Chief Analyst at FXStreet, notes: “The AUD/USD pair is under pressure and near the 0.6500 mark. From a technical point of view, the risk skews towards the downside, given that the pair develops below all its moving averages in its daily chart, while technical indicators in the same time frame maintain modest downward slopes within negative territory. Even further, the 20 Simple Moving Average (SMA) has recently crossed below directionless 100 and 200 SMAs, reflecting prevalent selling interest.”

Bednarik adds: “AUD/USD bottomed at 0.6513 on Tuesday, and any extension below the level should favor a bearish continuation towards the 0.6470 price zone. Once below the latter, the pair could target the 0.6420/30 region, where it posted multiple daily lows back in April and May. To the upside, Wednesday’s high at 0.6545 provides near-term resistance en route to the 0.6600 threshold. Sellers will likely reappear should the pair approach to the latter.”

Employment FAQs

How do employment levels affect currencies?

Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

Why is wage growth important?

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

How much do central banks care about employment?

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

Economic Indicator

Unemployment Rate s.a.

The Unemployment Rate, released by the Australian Bureau of Statistics, is the number of unemployed workers divided by the total civilian labor force, expressed as a percentage. If the rate increases, it indicates a lack of expansion within the Australian labor market and a weakness within the Australian economy. A decrease in the figure is seen as bullish for the Australian Dollar (AUD), while an increase is seen as bearish.

Why it matters to traders?

The Australian Bureau of Statistics (ABS) publishes an overview of trends in the Australian labour market, with unemployment rate a closely watched indicator. It is released about 15 days after the month end and throws light on the overall economic conditions, as it is highly correlated to consumer spending and inflation. Despite the lagging nature of the indicator, it affects the Reserve Bank of Australia’s (RBA) interest rate decisions, in turn, moving the Australian dollar. Upbeat figure tends to be AUD positive.

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