The Australian labour market: what to expect from this week’s employment and wages data
The RBA have told the market that the jobs market is at the centre of their policymaking decisions; giving this week’s labour market data an even greater air of significance.
When is the data released?
The Wage Price Index data is released on Wednesday the 15th of May at 11.30AM (AEST); and employment data is released on Thursday the 16th of May at 11.30AM (AEST).
The labour market data that matters:
|Unemployment Rate||Participation Rate||Wage Growth (YoY)||Underemployment Rate|
What are the key themes to watch?
1. Employment Growth and the Unemployment Rate
The Australian economy has experienced robust jobs growth for several years. The consequence has been an increasingly tight labour market, with the unemployment rate falling at stages this year to as low as 4.9 per cent. Such conditions haven’t been experienced since mid-2011; and is one of the core reasons the RBA remains optimistic about the outlook for the Australian economy. Economists aren’t expecting a change to the status quo this week, which plays well into the RBA’s narrative: consensus estimates are suggesting a steady unemployment rate and a solid jobs gain of 15k this month.
2. Wage growth and underemployment
Much like developed economies the world-over, one cause for endemically low inflation and interest rates within the Australian economy has been the lack of wages growth. Despite a tighter labour market, and signs spare capacity is gradually being absorbed in the economy, wage growth has proven tepid at best, languishing below 2.50 per cent for the better part of 5 years. Though the causes for this dynamic are complex, one reason for the phenomenon has been “underemployment” in the Australian economy. Economists and analysts alike will be keeping a close eye on underemployment and wage growth, for any indication of emerging inflation pressures.
What are surveyed economists expecting?
|Employment Change||Unemployment Rate||Participation Rate||Wage Growth (YoY)|
How could the data impact financial markets?
1. Interest rates
The RBA have put the labour market front and centre of their monetary policy considerations. While acknowledging soft domestic inflation, and sub-optimal economic growth conditions, the RBA has stated that while joblessness remains low, it feels comfortable keeping interest rates at 1.50 per cent. After last week’s RBA meeting, and the release of its Monetary Policy Statement, where this message was reaffirmed, interest rate trades have pushed back bets of rate-cuts from the RBA. If the labour market data disappoints, expect rate cut expectations to be bought forward again, and drag bond yields down; while if it exceeds forecasts, expect the opposite to prove true.
2. Australian Dollar
The Australian Dollar has grown out of favour recently, as Australia’ economic fundamentals deteriorate, and heightened global geopolitical risks drive investors to safe-haven assets. The AUD/USD has become very familiar with the 0.6900 handle, pinned down by widening yield differentials. While the trend will be difficult to reverse in any event, a stronger than expected wage growth figure, or a beat in the headline employment rate, will probably give the AUD a lift. Conversely, a disappointing set of numbers will keep downward pressure on the AUD/USD – though any move lower in the pair may be a grind, given the “short-Aussie” trade is a crowded one.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.