Forex Flash: Surprising AUD labour market strength - Nomura

Nomura economists Charles St-Arnaud and Martin Whetton note that the Australian economy gained 71.5k jobs in February, much better than consensus expectations of a 10k increase.

He notes that this follows an upwardly revised increase of 13.1k in January and is the biggest monthly increase since July 2000. They feel that the details look fairly positive but while the unemployment rate remained unchanged at 5.4%, it was mainly the result of a bounce in the participation rate to 65.3% from 65%, signalling some confidence in the labour market. They write, “Most of the job gains were in part-time jobs (+53.7k), though the number of full-time jobs also rose (17.8k). The total number of hours worked rose 0.7% m-o-m, while employment rose 0.6% m-o-m increase, signaling that the average number of hours worked by employee also increased. The data show that most of the job gains were in Victoria, reversing the weakness seen in January, and New South Wales.”

Overall, they see this report as being strong, suggesting that the Australian labour market is not weakening after months of lackluster performances. however, labour data is notoriously volatile and one month does not constitute a new trend. However, they write, “Nevertheless, the better-than-expected performance of the labour market reduces the likelihood of a rate cut, in our view, and incoming data continue to remain important. As such, we believe that any signs of a rebound in commodity exports after the weather-related decline in January would be welcomed by the Reserve Bank, while a moderation in inflation could provide it with an opportunity to cut rates. We continue to expect no move at the April meeting, with the first possible move in May.”