Australia’s unemployment rate increased to 4.1% in April, surpassing expectations of 3.9% and the previous month’s figure of 3.8%, according to official data from the Australian Bureau of Statistics (ABS) released on Thursday. The report also highlighted an employment change of 38.5K in April, up from a decline of 6.6K in March, significantly above the forecasted 23.7K.
The participation rate in Australia edged up to 66.7% in April from 66.6% in March. However, the dynamics within employment types showed a mixed picture. Full-time employment decreased by 6.1K compared to the previous increase of 26.6K, while part-time employment surged by 44.6K, reversing a prior drop of 32.5K.
Bjorn Jarvis, head of labour statistics at the ABS, elaborated on these findings, noting, “With employment rising by around 38,000 people and the number of unemployed growing by 30,000 people, the unemployment rate rose to 4.1 per cent, and the participation rate increased to 66.7 per cent.” He further explained that the rise in unemployment reflected not only more people without jobs actively seeking work but also an unusual number of individuals waiting to start a job.
Jarvis emphasized that the concurrent increases in employment and unemployment suggest that the labour market remains tight, albeit less so than in late 2022 and early 2023. The employment-to-population ratio held steady at 64.0% in April, indicating that employment growth is broadly keeping pace with population growth.
In financial markets, the Australian Dollar (AUD) experienced immediate selling pressure following the employment report, with the AUD/USD pair trading at 0.6690, down 0.04% on the day. The Australian Dollar exhibited the weakest performance against the New Zealand Dollar for the week.
Market analysts had anticipated an increase in the unemployment rate to 3.9% in April after it ticked higher to 3.8% in March. The creation of approximately 24K new job positions was expected. However, the actual figures surpassed these expectations.
Tight labour market conditions have posed upward risks to inflation globally throughout 2023, with only modest signs of loosening. Australia’s labour market has remained relatively robust, aligning with global trends. The Reserve Bank of Australia (RBA), in its early May meeting, kept the Official Cash Rate (OCR) unchanged at 4.35%. RBA Governor Michele Bullock emphasized vigilance on inflation risks, indicating potential policy adjustments as needed, though she suggested that further tightening might not be necessary and did not commit to rate cuts.
The modest employment report for March followed a strong February, keeping the labour market off the RBA’s immediate concern list, with inflation remaining the primary focus. The ABS’s latest Consumer Price Index (CPI) data showed a quarterly increase of 1.0% in Q1 2024, up from 0.6% previously. Year-over-year, the CPI rose by 3.6%, easing from the 4.1% recorded in the twelve months to December.
Market participants now anticipate that the first interest-rate reduction could occur by March 2025. The April employment report, published early on Thursday, confirmed the creation of 23.7K new jobs, with the unemployment rate projected at 3.9% and the participation rate previously at 66.6%.
A strong employment report is likely to diminish expectations for imminent rate cuts, providing near-term support for the AUD. Conversely, a particularly poor report could weigh on the currency, although the prevailing weakness of the US Dollar might mitigate this impact. One disappointing report alone is unlikely to signal a significant loosening of the labour market or shift the RBA’s future monetary policy stance.
From a technical perspective, FXStreet Chief Analyst Valeria Bednarik noted that the AUD/USD pair reached new four-month highs following the US CPI release, trading in the 0.6660 region. The pair’s upward momentum faces resistance around 0.6700, with further obstacles at 0.6730 and 0.6770. A weak employment report could pressure the AUD, with near-term support around 0.6600, followed by the 0.6550-0.6560 zone.
Bednarik added that AUD/USD movements are closely tied to US Dollar weakness, driven by reduced expectations for imminent Federal Reserve rate cuts. As speculative interest processes the employment figures, the pair is likely to resume its pre-release trend.
