Australia’s jobless rate drops, currency rises

Bloomberg

Australia’s jobless rate fell in April, adding to the previous month’s strong employment gains, reinforcing expectations that the central bank won’t cut interest rates further.
Employment rose 37,400 from March; economists forecast 5,000 gain Jobless rate fell to 5.7%, the
lowest since January, vs 5.9% estimate. Full-time jobs fell 11,600; part-time employment rose 49,000. Participation rate held at 64.8% vs forecast 64.7%. Aussie dollar climbed, buying 74.52 US cents at 12:43 p.m. in Sydney, compared with 74.17 before the report.
The unexpectedly strong result bolsters the central bank’s view that the labor market is starting to gather steam, even though the data series is notoriously volatile. The Reserve Bank of Australia is looking for improved jobs and wage growth to pull core inflation back into its 2-3 percent target band, but is mindful of record high underemployment.
Jobs growth was recorded in each of the nation’s states except South Australia. While gains have been lagging in resource-based Queensland and Western Australia, both states have shown signs of recovery in the past two months.
The result “suggests that the labor market has come to life even though economic growth appears to have slowed a bit,” said Paul Dales, chief Australia and New Zealand economist at Capital Economics in Sydney. “These figures further reduce any lingering chances of more rate cuts. But the labor market won’t prompt the RBA to hike rates for a long time yet.”
“Interest rates are set to remain on hold for an extended period,” said Craig James, chief economist at the securities unit of Commonwealth Bank of Australia. “While the job market is improving and justifying government and Reserve Bank forecasts, it will take some time for the stronger results to be reflected in higher wages and stronger consumer spending.”
“The lack of an acute unemployment shock in the near term supports the RBA’s clear preference for a gradual return of inflation to target, though we still view the bias as being to lower rates over time, given festering weakness in wages and inflation,” said Ben Jarman, senior economist at JPMorgan Chase & Co.