Australia’s Job Gains Show Economy Absorbing RBA Rate Hikes

(Bloomberg) -- Australian jobs rebounded in August following a surprise drop while the unemployment rate held steady, suggesting the labor market is managing to cope with the Reserve Bank’s 12 interest-rate increases. 

The economy added 64,900 roles from the prior month — driven primarily by part-time jobs — compared with estimates for a 25,000 gain, Australian Bureau of Statistics data showed Thursday. The jobless rate held at 3.7% as the labor force swelled, having hovered in a range of 3.4%-3.7% since June last year.

The data bolster the case for the RBA to hike one more time given inflation remains elevated and the labor market is still tight. Incoming Governor Michele Bullock has warned policy decisions will be a month-by-month prospect until at least next year. The Australian dollar was little changed.

“The large increase in employment in August came after a small drop in July, around the school holiday period,” said Bjorn Jarvis, ABS head of labor statistics. “Looking over the past two months, the average employment growth was around 32,000 people per month, which is similar to the average growth over the past year.”

The RBA held rates at 4.1% for a third straight month in September and economists and money markets are divided on the policy outlook. The former expect one more hike to 4.35% in November, while traders are suggesting rates have now peaked as inflation looks to be moving back toward the RBA’s 2-3% target. 

Thursday’s figures showed that annual jobs growth eased to 3% from 3.1% at the start of the year. Economists expect the pace of employment gains to slow further with the jobless rate seen hitting 4.5% next year. 

The labor data also showed:

• The participation rate climbed to 67%
• Underemployment rose to 6.6% from 6.4% a month before and under-utilization also advanced
• Full-time roles increased by 2,800, while part-time spiked by 62,100
• The employment to population ratio climbed to 64.5%

The figures further support expectations Australia will avoid the type of wage-price spiral seen in many developed economies, with annual pay gains currently at 3.6% and expected to peak at around 4%.

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