Australia's unemployment rate edged up slightly in December, but a record number of new jobs have made it less likely that the Reserve Bank of Australia will cut interest rates next month.
Australia experienced a record high in employment in December, with 56,300 more people finding jobs than anticipated by analysts. This surge in employment, pushing the participation rate to a record 64.5 percent, has complicated the Reserve Bank 's decision on potential interest rate cuts in February. While the unemployment rate edged up to 4 percent from 3.
9 percent in November, the unexpected spike in employment likely signals continued strength in the labor market, potentially delaying the anticipated easing of monetary policy.The Australian Bureau of Statistics released data on Thursday revealing the significant increase in employment, exceeding expectations three-fold. This development presents a challenge for the Reserve Bank, which has indicated its willingness to lower interest rates only when it observes a slowdown in the labor market and a sustained decrease in inflation to its target range of 2 to 3 percent. The RBA's next board meeting, where the cash rate will be discussed, is scheduled for February 18th.Markets initially predicted a 71 percent chance of a rate cut at the Reserve's first meeting of the year, but this probability has since dropped to 69 percent following the release of the strong jobs figures. Treasurer Jim Chalmers expressed optimism about the economy's trajectory, citing the creation of 1.1 million jobs under the Albanese government and the economy's ability to manage inflation while fostering job growth. While the rise in both employment and unemployment suggests a larger pool of people actively seeking work, indicating a robust labor market, concerns remain about inflationary pressures. Recent data points to a slight slowdown in wage growth to 3.5 percent in the September quarter, but the volatile nature of monthly inflation data necessitates a closer look at the quarterly inflation reading on January 29th. Experts suggest caution in expecting an immediate rate cut, emphasizing the need for continued monitoring of inflation and labor market dynamics
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