Australian jobless rate unchanged for now

<p>Australia’s jobless rate didn’t rise to 5.5% as the consensus was expecting, but it didn’t improve either – remaining unchanged at 5.4%. The composition was […]</p>

Australia’s jobless rate didn’t rise to 5.5% as the consensus was expecting, but it didn’t improve either – remaining unchanged at 5.4%. The composition was not the best  - full time employment fell by 9,800 positions while the participation rate fell slightly. Total job growth was 10,400 but part timers were again the swing factor.

The number is unlikely to please the Reserve Bank of Australia (RBA) and there will be more cause for caution than optimism despite global risk sentiment rising.

With inflation at the bottom end of the 2-3% RBA target range and the job market unlikely to improve anytime soon, the RBA is increasingly likely to move through one more rate cut in the next two months. Yesterday’s retail numbers showing a modest decline should also reinforce this move.  The market is still split on timing but for us there are only two things that really matter for the RBA – inflation and employment.

With the later looking vulnerable, the RBA knows it’s perhaps worth risking one more move downward before changing course by the end of 2013 – the rate of inflation is not too high enough for the rate cut risk to be too great. It’s a fairly low risk move in terms of inflation breaking out.

We’ll monitor the rest of the economy and other macro data over the next few weeks. At this stage, a 25 basis point cut in March is probably a 50% chance for us. Currency traders are starting to think likewise with the Australian dollar struggling to hold ground against the US dollar, last buying around 103 US cents. The Aussie has also slipped slightly against the Yen but the upward trend seems in place for now.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.