Australian jobless rate rises in April, erasing risk of rate hike

By Thomson Reuters May 15, 2024 | 9:46 PM

By Wayne Cole

SYDNEY (Reuters) – Australian employment rose by more than expected in April, data showed on Thursday, but the jobless rate still climbed to a three-month top as the growth in workforce outpaced job creation.

The jump in unemployment was seen as erasing any chance of a further rate hike from the Reserve Bank of Australia (RBA), a big swing from early in the month when the probability had been as high as 40%.

Markets now imply around a 54% chance of a cut in the 4.35% cash rate as early as December, cheering investors who were still celebrating a slowdown in U.S inflation and a revival of hopes for an easing in policy there.

Data from the Australian Bureau of Statistics showed net employment rose 38,500 in April from March, topping forecasts for a bounce of 23,700. All the gains were in part-time work, with full-time employment dipping 6,100.

The jobless rate rose to 4.1%, from an upwardly revised 3.9%, and above market forecast. The participation rate ticked up to 66.7%, while hours worked were flat.

“A 30,000 people increase in unemployment reflected more people without jobs available and looking for work, and also more people than usual indicating that they had a job that they were waiting to start in,” said Bjorn Jarvis, ABS head of labour statistics.

That suggested employment could rise again in May as those workers started, perhaps pulling unemployment back down.

Still the employment-to-population ratio was steady at 64.0% in April, indicating that jobs gains were only just keeping pace with rapid population growth.

“This suggests that the labour market remains tight, though less tight than late 2022 and early 2023,” said Jarvis.

The RBA had expected unemployment to gradually rise to 4.2% by the end of the year as employment lags behind growth in the labour force, and is keen to not risk a deeper downturn by raising interest rates too far.

Rates are already at a 12-year high and putting a painful squeeze on borrowers across the economy.

While inflation surprised on the upside in the first quarter at an annual 3.6%, there are signs pressures are easing with consumer demand very weak and wages coming off the boil.

Figures out this week showed wage growth unexpectedly eased to an annual 4.1% in the March quarter, while growth in the private sector fell for the first time since late 2020.

Australia’s Labor government also announced rebates on energy bills and rents that it predicts will lop half a percentage point off consumer price inflation in the coming 12 months, at least temporarily.

(Reporting by Wayne Cole; Editing by Muralikumar Anantharaman)