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Who’s ready to trade Australia’s biggest data release this week?

Here are points you need to know if you’re planning on catching the event on Thursday at 2:30 am GMT:

What happened last time?

  • March employment change revised higher from 25,700 to 27,700
  • March unemployment rate revised higher from 5.0% to 5.1%
  • April added net 28,400 jobs vs. 15,200 expected
  • April unemployment rate up from 5.1% to 5.2%
  • April labor force participation rate improved from 65.7% to 65.8%

The economy added a net of 28,400 jobs in April, which was way better than the 15,200 addition that markets had expected. What’s more, March’s net job additions were also revised higher!

Details didn’t look half bad, with full-time employment edging higher by 16,600 while a net of 4,600 part-time workers had also found jobs.

What made investors jittery was the fact that unemployment rate also hit an 8-month high of 5.2% for the month. And that’s after March’s rate was also revised higher from 5.0% to 5.1%!

AUD 15-Minute Forex Charts
AUD 15-Minute Forex Charts

The Aussie spiked lower at the release though it also recovered most of its losses before the London session started.

What are traders expecting this time?

  • April employment change to slip from 28,400 to 13,500
  • April unemployment rate to hold steady at 5.2%

After two consecutive months of posting 25,000+ net job additions, analysts think that the economy will only see 13,500 jobs added in May.

The unemployment rate, meanwhile, is expected to maintain its 5.2% reading.

How reasonable are analysts’ expectations this time? Let’s take a look at what leading indicators have to say.

The employment component of AIG’s manufacturing index improved by 3.6 points to 55.1, a welcome development after April’s contraction. Manufacturing-related wages slipped a bit, though.

AIG’s construction index dipped in May, but that didn’t stop the employment component from improving by 0.3 points even as it remains in contraction territory at 39.5.

Meanwhile, it was employment and new orders that lifted AIG’s services index higher. The employment component shot up after contracting last month, while wages saw upside pressure across the service sectors.

ANZ’s job ads dropped sharply in May. However, David Plank, ANZ’s Head of Australian Economics, also hinted that the combo of ANZAC and Easter holidays and the federal elections might have delayed hiring, and that we could see job ads “rebound strongly” in June.

Finally, the NAB business confidence report printed earlier today reflected the employment component rising to a +2 reading after a sharp decline last month.

But before you celebrate, NAB’s Alan Oster also cautioned that “the bounce in confidence is likely to be short-lived” and that they’re still watching the employment index closely for “lead on turning points in the labour market.

So, it looks like leading indicators slightly favor a strong labour market in May. Ditto for historical numbers, which suggest that market geeks tend to underestimate both employment changes and the unemployment rate around this time of the year.

May Employment Changes
May Employment Changes
May Unemployment Rates
May Unemployment Rates

Strong employment numbers would be welcome to Reserve Bank of Australia (RBA) members who recently cut interest rates by 25 basis points and shared that “further gradual lift in wages growth is expected” to help lift household disposable income and consumption.

If we see strong headline numbers but remarkably weak wage growth, then we could see the Aussie trade lower against its counterparts as traders price in another dovish month for the RBA.

But if employment numbers strengthen as leading indicators say, then we could see the comdoll regain some of its losses from last week.