Labour market strength surprises but not expected to derail RBA cut
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More news: The labour market's strength has taken economists by surprise but top forecasters are not wavering on their expectations of a 25 basis point cut when the Reserve Bank meets next week.
Commonwealth Bank chief economist Luke Yeaman, speaking to Capital Brief minutes after the release of the data, said he was still absorbing the implications but it shouldn't affect next week's cut expectation.
“Generally speaking, we’ve seen consistent strength in the labour market and that has been surprising to us and to many other economists," he said.
“I think that does give the Reserve Bank reason to be relatively cautious but the strength in the labour market shouldn’t, in our view, preclude further interest rate cuts given the … inflation data.”
State Street Global Advisors' APAC economist Krishna Bhimavarapu said in a note that the headline employment figures were "four times" the firm's expectation for the month and suggested this could be due to sampling issues in the data due to the floods in Queensland.
"The data nonetheless puts our call for four more rate cuts this year at risk," said Bhimavarapu.
"We still expect the RBA to cut the cash rate by 25 basis points next week to 3.85% and maintain the view that the cash rate may end 2025 at 3.1%.”
Unemployment rate steady at 4.1%
The news: The unemployment rate held steady at 4.1% over April, in seasonally adjusted terms, according to the Australian Bureau of Statistics.
While this was in-line with expectations for the jobless rate, the number of jobs created was much stronger than anticipated.
The numbers: Employment increased by 89,000 people, compared to 20,000 expected by economists.
Over the past 12 months an extra 390,000 people have been counted as employed, a growth rate of 2.7% compared to the 2.1% growth rate of the population aged over 15.
The participation rate increased slightly in April to 67.1%.
What they said: "With employment increasing by 89,000 people and the number of unemployed increasing by 6000 people, the unemployment rate remained steady at 4.1% for April," ABS head of labour statistics Sean Crick said.
‘The participation rate for 35 to 44 year olds had the largest annual growth, up 1.9 percentage points to 88.3%,’ Crick said.
"In trend terms, the employment-to-population ratio remained at 64.3% in April, while the participation rate remained at 67%."
The source: Australian Bureau of Statistics media release
