Australia’s December Unemployment Change

Unemployment Data

There are three key bits of data that are released simultaneously, but the one that gets the most focus is the rate itself. This is seasonally adjusted data, which is relevant considering the large agricultural base in Australia.

Unlike the Fed, the RBA doesn’t have a mandate to keep unemployment low. However, employment rates can have implications for inflation, which is something the notoriously conservative central bank is concerned about.

So, even though the employment rate is one of the key data points of the monthly economic calendar, its impact on the currency is mostly indirect in the form of helping to form expectations of future inflation and economic trends.

One of the important factors relevant to Australia, in particular, is that as the unemployment rate drops to its structural level, it becomes increasingly harder for businesses to find employees, which can impact their productivity. This also causes salaries to rise, and the subsequent increased demand can translate into inflation. Australia’s CPI has been hovering close to the 2% target since January of 2017, keeping the RBA quite happy in this regard.

The Trends

However, during that period, the unemployment rate has been dropping, reaching a bottom of 5.0% in October. Where exactly the structural level is, is a matter of debate among economists, but there is a consensus that it’s somewhere between 4-6% depending on circumstances, and with unemployment in the current range, policymakers might be keeping a close eye on potential inflationary implications.

November’s unemployment rate came in at 5.1%, a tick up from the six-and-half year low of 5.0% registered during the two months prior. This happened despite employment increasing by 37K, well above market expectations of 20K, indicating that the unemployment trend is being driven more by demand for jobs than any underlying weakness in job creation.

Current expectations are for the rate to remain at 5.1% as registered in the prior month. It should be noted that the RBA expected that unemployment would reach 5.5% by the end of the year, but their assessment was that it would fall to that rate. The economy has, therefore, exceeded their expectations. In their latest statement, they project unemployment to reach 4.75% by the end of next year.

1 2
View single page >> |

Disclaimer: Orbex LIMITED is a fully licensed and Regulated Cyprus Investment Firm (CIF) governed and supervised by the Cyprus Securities and Exchange Commission (CySEC) (License Number 124/10). ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.