Aside from FOUR central bank decisions, tier 1 reports such as Australia’s jobs numbers are also scheduled for release this week. On Thursday at 12:30 am GMT, to be exact.
What will we learn from the report? More importantly, how can you make pips from the event? Here are tips you need to know:
What happened during last month’s release?
Australia’s headline unemployment rate came in at 5.7% in January, which is an improvement from December’s 5.8% rate. Net employment change also painted a rosy picture at +13,500 when analysts had only expected a 9,700 increase. But the devil is in the details and the ones from the report had pretty sharp teeth.
For one thing, most of the job gains came from part-time employment. Australia added a net of 13,500 jobs in January, but only because the 58,300 increase in part-time jobs offset the whopping 44,800 decreases in full-time employment.
The labor force participation rate also brought headaches, as it slipped from 64.7% to 64.6% and hinted that the decline in the unemployment rate is actually from workers in the labor force getting discouraged from finding jobs rather than getting them. The only bright spot was the monthly hours worked, which inched 0.6% higher for the month.
February’s release puts the total of part-time workers up by 129,800 from a year ago, while full-time workers have declined by 40,100. Not a good sign for the RBA, which is already slightly worried about the quality of jobs provided in the economy.
Not surprisingly, the Aussie lost pips across the board. The weak details started the intraday downtrend, while a weak trading day for commodities pushed it even lower by the end of the day.
What can forex traders expect this time?
For the month of February, market geeks expect the unemployment rate to remain at 5.7% while the net jobs added are expected to increase from 13,500 to 16,300.
How realistic are market expectations for the upcoming release? Let’s look at a few leading indicators for clues:
According to ANZ, job advertisements fell by 0.7% in February after rising by 3.2% in January. This translates to an annualized rate of 6.9%, down from the previous month’s 7.1% rate. Trend growth has also eased to 0.4%, which is lower than the 8-month average of 0.6%.
Australian Industry Group (AIG)’s Performance of Services Index (PSI) report also wasn’t feeling the love, as it fell 5.5 points to 49.0 for the month. That’s a contractionary territory, yo! Apparently, only one of the five sub-indices has expanded, with employment dipping 4.6 points to 49.2.
AIG’s Performance of Manufacturing Index (PMI) fared a bit better, as it rose by 8.1 points to 59.3 for the month. This marks the fifth consecutive increase and the fastest expansion since May 2002. 6 out of 7 sub-indices inched higher with the employment component rising by 7.9 points to 57.5. Yowza!
Meanwhile, AIG’s Performance of Construction Index (https://www.aigroup.com.au/policy-and-research/mediacentre/releases/PCI-Feb2017/) shot up by 5.4 points to 53.1 in February and marked its highest reading since mid-2016. What’s more, the employment component expanded for the first time in four months to 53.5.
Last but not least is the NAB’s monthly business survey, which missed analyst expectations after showing strong January numbers. A closer look tells us that the employment component also slipped from 7 to 5 for February.
How can I trade the event?
Overall, Australia’s leading indicators are pointing to another mixed picture for the labor market. No wonder the RBA isn’t sure about its trends either!
If you’re a forex trader though, then you might want to pay attention to the details of the release. Specifically, look for the strength of full-time jobs added as well as wage growth and working hours. Remember that full-time jobs tend to support more consumer spending, as buyers are more confident about where their next moolah will be coming from.
A healthy addition of full-time jobs could nudge the Aussie from its downtrends against its major counterparts. But if the majority of job additions come from part-time employment again, then we might see even more weaknesses from the comdoll.
And then there’s the possibility that forex traders will shrug off the report and focus instead on the bombshells (if there are any) from the FOMC statement printed six hours before Australia’s release.
Still, depending on the results, the jobs report could either fuel or provide retracement from the Aussie’s weekly trends. Make sure you stick around if you’re planning on trading the Aussie this week!