© Reuters. FILE PHOTO: People silhouette in front of the Sydney Opera House at sunset in Australia November 2, 2016. REUTERS/Stephen Savor/File Photo
Written by Stella Keough
SYDNEY (Reuters) – Australian employment blew previous expectations for a second month in March while the unemployment rate held near a 50-year low, a strong and unequivocal report that suggests the central bank’s tightening campaign may not be over yet.
Figures released by the Australian Bureau of Statistics on Thursday showed net employment rose by 53,000 in March compared to February, when it rebounded by 63,600, but was revised down slightly. Market expectations were for a rally of 20,000, after several months of seasonal volatility.
The unemployment rate remained at 3.5%, when analysts were looking for a boost to 3.6%. Full-time employment rose by 72,200, after a huge increase of 74,900 in the previous month, an encouraging sign for household income.
The domestic dollar rose 0.2% to $0.6707, three-year bond futures fell 7 points to 97.06, and markets priced in a slightly higher 18% chance of a 25 basis point rally when the RBA meets next May.
“There are very few signs of weakness in this data and little to suggest that the labor market is slowing in a meaningful way,” said Sean Langkiek, head of macroeconomic forecasts at BIS Oxford Economics.
“This confirms our expectation that the first quarter CPI reading will be strong, and we expect to see the RBA raise rates again in May.”
Keen to preserve solid job gains, the Reserve Bank of Australia paused rate hikes in April to assess the impact of tightening so far, although that could mean a slower return to the inflation target when compared to other major economies.
Governor Philip Lowe said the pause does not mean the increases are over and that the monthly flow of data will determine whether the central bank will need to act again on interest rates.
A major relief for policymakers is that the risk of a damaging spiral in prices and wages in the country has remained low, with wage growth still well below sharp inflation, which has shown signs of peaking.
Thursday’s data showed that the participation rate held near record levels at 66.7%, indicating that the supply of labor is rising to meet demand, thanks to more women and immigrants entering the workforce, which reduces upward pressure on wages.
Job openings have eased from highs for the third consecutive quarter in February, but are still well above pre-pandemic levels in a sign of a still-tight job market.