The unemployment rate remained stable in October at 4.1 per cent, with employment growth moderated to 16,000, according to data from the Australian Bureau of Statistics (ABS).
While the consensus was for an unemployment rate of 4.1 percent, employment is expected to peak around 25,200.
The unemployment rate has averaged 4.1 percent since April 2024 – it briefly reached 4.2 percent in July 2024.
Commenting on the figures, HSBC’s Paul Bloxham noted that the unemployment rate has remained stable at its current level over the past seven months, suggesting that labor market slack may be stalling.
“The unemployment rate remains low and stable, other measures of spare capacity are moving sideways, employment growth is positive and the participation rate remains high. If easing is effectively stalled, this increases the risk that the RBA will not be able to cut its policy rate,” Bloxham said.
“In short, the labor market is still at or slightly above full employment and does not appear to be easing further at this point.”
He reasoned that if the labor market didn’t ease further, the rate cuts might not happen at all.
Krishna Bhimavarapu, APAC economist at State Street Global Advisors, agrees that the current unemployment rate does not justify a rate cut in the short term.
“With the RBA recently lowering its GDP forecast, this indicates that it is comfortable remaining restrictive for an extended period,” Bhimavarapu said.
Similarly, VanEck portfolio manager Cameron McCormack said the latest data provided little incentive for the RBA to bring forward its rate easing timetable.
“The strong labor market continues to put upward pressure on already high services inflation, hampering inflation’s progression towards the RBA’s 2-3 per cent target band. This reinforces our view that a rate cut is unlikely before the end of next year,” McCormack said.
The market is currently forecasting a first decline for August 2025.
Until the latest release of the Consumer Price Index (CPI), the ABC had predicted a rate cut before Christmas. While the bank’s updated forecast now calls for a fall in February, Belinda Allen noted on Thursday that for that to happen the RBA will likely need to see a further increase in the unemployment rate to 4.1 percent, as well as a moderation of the reduced average CPI. .
“For the unemployment rate to average 4.3 percent in the fourth quarter 24 [assuming an unchanged participation rate]job growth is expected to average just under 15,000 over the next two months,” she said.
CBA peer NAB on Thursday became the first of the big four banks to push back its rate cut forecasts until May 2025. On the back of the unemployment figure, NAB said: “The data on inflation show some persistent pressure on components sensitive to domestic demand and employment. costs.
“Combined with the resilience evident in recent labor market data, we believe the RBA should be concerned about a further weakening of the labor market in deciding to cut spending as early as February, with May being more likely.”
