On Thursday, the Australian dollar took a hit, even though December’s employment figures surpassed expectations. According to the Australian Bureau of Statistics, the job market showed impressive growth with 56,300 new jobs, a significant jump from the forecasted 15,000.
Interestingly, the unemployment rate nudged up from 3.9% to 4.0%, as more people joined the workforce. This increase highlights more individuals seeking work opportunities.
Here are the crucial takeaways from the December employment report:
– Total employment shot up by 56,300, well above the anticipated 15,000.
– The unemployment rate climbed slightly to 4.0% from November’s 3.9%.
– Full-time roles dropped by 23,700, bringing the total to 10,037,600.
– Part-time positions saw a boost of 80,000, amounting to 4,546,800.
– Participation in the workforce edged up to 67.1%.
It seems the strong demand for labor is being tempered by a swelling workforce, partly fueled by migration. This is helping to ease wage pressures and dampening inflation risks. Consequently, there’s a 70% chance that the Reserve Bank of Australia (RBA) will cut its 4.35% cash rate by 25 basis points at their meeting on February 18.
The Australian dollar initially responded positively to the surprisingly strong job figures, bouncing back from its earlier losses in the U.S./Asian trading session. However, this enthusiasm was short-lived. The focus shifted to the underlying signals of labor market softness, including the rise in the unemployment rate and the shift from full-time to part-time employment.
Despite robust hiring, the growing workforce is mitigating wage pressures. This softness in the labor market is likely why traders are still betting on a rate cut by the RBA in February, leading to the Aussie dollar’s subsequent decline against major currencies.
At the time of reporting, the AUD experienced its most significant drops against safe-haven currencies such as the JPY, USD, and CHF, while showing minor weaknesses against “risk” currencies like the NZD, GBP, and CAD.
