Think the upcoming Australian jobs release might have more clues on whether or not the RBA can cut again? Here’s what to expect.
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?
- June employment change at 0.5K vs. 9.1K forecast
- June unemployment rate unchanged at 5.2% as expected
- Labor force participation rate steady at 66% in June
- May employment change upgraded from 42.3K to 45.3K
The Land Down Under failed to impress with its June jobs report as it added a meager 0.5K in hiring versus the projected 9.1K gain. Still, this was enough to keep the jobless rate steady at 5.2% as expected.
The seasonally-adjusted labor force participation rate was also unchanged at 66% for the month while the underemployment rate had a pretty good improvement from 8.6% to 8.2%.
Still, the Aussie had a mostly bullish immediate reaction to the report before consolidating for the rest of the Asian session against most of its peers. It seems that market watchers already anticipated downbeat results then!
What are traders expecting this time?
- July employment change to come in at 14.2K
- July jobless rate to stay unchanged at 5.2%
After a disappointing June report, a stronger pace of hiring growth at 14.2K is expected for the month of July. This should be enough to keep the unemployment rate steady at 5.2% for another month.
How reasonable are analysts’ expectations? Let’s take a look at what leading indicators have to say.
The employment component of AIG’s manufacturing index improved by 3.1 points to 53.2, higher than its 12-month average of 52.4 and indicative of a stronger pace of expansion. The index for average wages in this sector, however, slipped 2.8 points to 56.9.
AIG’s services index slipped from 52.2 to 43.9 in July, reflecting a huge deterioration to industry contraction. The employment index tumbled 3.8 points to 43.8 in July while the wages index dipped 0.5 points.
As for the construction sector, the AIG survey revealed that employment also took a big hit for the month as the index fell 7.7 points to 35.9, deep into contraction levels. Averages wages also stumbled by 3.1 points.
Meanwhile, ANZ job ads ticked up by 0.8% in July, following a strong 4.9% increase in the previous month. Still, this marked back-to-back monthly gains, even as July job advertisements are down 9.1% from the previous year.
Finally, the NAB business confidence report saw an improvement from 2 to 4 in July, although the index business conditions slipped by two points. Components of the report revealed that this was mostly due to a drop in the employment sub-index from 5 to 0.
Recall that in a previous release, NAB’s Alan Oster cautioned that they’re still watching the employment index closely for “lead on turning points in the labour market.” Talk about premonition!
Will this be enough to convince Aussie traders that another RBA interest rate cut is in the works?
Well, it could depend on by how much the actual result goes above or below forecasts! Also keep in mind that traders are mindful of falling wages, so it’s likely that any big pickup in hiring might still be taken with a grain of salt.
In any case, just be careful of additional volatility during the time of the release and practice proper risk management.