The Australian dollar shot higher on news the nation’s full-time employment rose, which could reassure the Reserve Bank there is positive underlying momentum in the economy.
The Aussie spiked to 72.07 US cents from 71.65 in just 10 minutes on the release of the data outlining the jobless rate remained steady at 5.0 per cent in January.
Thursday’s data from the Australian Bureau of Statistics showed the full-time jobs boost knocked the seasonally adjusted underemployment rate down from 8.3 per cent to 8.1 per cent, while the participation rate increased by 0.1 percentage points to 65.7 per cent.
Westpac senior currency strategist Sean Callow said the Aussie dollar had benefitted from three consecutive months of better-than-expected jobs figures.
“Jobs have continued to be created but the mix has tilted towards full-time over the past few months,” he told news.com.au.
Mr Callow said he currently had a high value estimate of 73 US cents for the Australian dollar based on strong commodity prices and interest rate differentials, but its value would be at the mercy of the RBA’s expected cut of the official cash rate.
RBA Governor Philip Lowe is widely predicted to cut the rate twice in the second half of this year, which is expected to drag the Aussie dollar well-lower than 70 US cents.
A$ understandably likes the 3rd straight upside surprise on Aust jobs. Our AUD/USD fair value estimate is in high 0.73s but RBA easing pricing is likely to be a persistent drag on the Aussie #ausbiz pic.twitter.com/LP4jKFMC28
— Sean Callow (@seandcallow) February 21, 2019
Debate has raged on what the RBA’s next move with the cash rate will be and AMP chief economist Shane Oliver tweeted the job figures will strengthen the case for it remaining at its current record low of 1.5.
“The labour market remains a strong point for the Aust economy,” he said. “(This) will keep RBA on hold for a while yet.”
Mr Oliver has been vocal on his prediction the next move in the rate will be down, saying it will likely be cut twice in the second half of this year.
Aust January jobs +39K/+2.2%yoy, with a bounce back in full time jobs of +65K. Unemployment flat at 5% (as participation up). The labour market remains a strong point for the Aust economy! Will keep RBA on hold for a while yet. (We don’t expect a cut until second half)…#ausecon pic.twitter.com/13air6zHCp
— Shane Oliver (@ShaneOliverAMP) February 21, 2019
The ABS data matched consensus expectations and showed a net increase of 39,100 persons with work, including 65,400 more people in full-time employment and 26,300 fewer people in part-time employment.
BIS Oxford Economics analyst Sarah Hunter said the result was positive, especially the lift in full-time work, but she remains cautious about the nation’s economic outlook.
“Strong employment growth will help to support consumer spending and therefore GDP growth, but households continue to face weak growth in wages and other sources of income,” she said.
“Residential construction is also set to become a bigger drag on momentum as we move through 2019.”
Lacklustre December quarter wage data on Wednesday tested the RBA’s narrative on the health of the economy, with analysts pinning hopes on an increase in jobs to stimulate spending amid a housing downturn.
Ms Hunter said a steady unemployment rate would likely see the cash rate kept on hold this year.
“Growth will be strong enough to not require a cut, but not strong enough to warrant a rate rise until the end of 2020 at the earliest,” Ms Hunter said.
In seasonally adjusted terms, the largest increase in employment in January was in New South Wales, a 47,200 increase in jobs, followed by Victoria, up 2200, and Western Australia, up 800.
The largest decrease was in Queensland, down 19,900 jobs, followed by South Australia, down 4500.
The seasonally adjusted underemployment rate decreased in all states.
The ABS said January’s net movement was underpinned by about 300,000 people entering and leaving employment.
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