On October 17 at 12:30 am GMT Australia will publish its labor market numbers for the month of September.
What are market players expecting and how might Aussie traders interpret the numbers? Here are points you need to know:
Last month’s release weighed on the Aussie
The economy added a net of 34,700 jobs in August, which is higher than the 10,000 increase that analysts had expected but weaker than the 36,400 uptick seen in July.
A closer look revealed that 15,500 full-time jobs lost were picked up by the 50,200-increase in part-time work created. Not good since the Reserve Bank of Australia (RBA) is already worried about weakening domestic consumption.
Meanwhile, Australia’s labor force participation rate edged higher, but the jobless rate also unexpectedly rose from 5.2% to 5.3%.
The combo of the Fed cutting its interest rates in the previous trading session; New Zealand’s weaker-than-expected quarterly GDP release, and Australia’s weak labor market data dragged the Aussie to new intraday lows where it stayed for the rest of the trading day.
Aussie traders aren’t expecting much this week
Looks like market geeks don’t consider last month’s weakness as a one-timer!
This week they only expect 15,000 new jobs for the month of September, while the unemployment rate and participation rate could remain at 5.3% and 66.2% respectively.
Do leading indicators support weaker expectations for job creation this month?
The employment component of AIG’s manufacturing index jumped by 6.2 points in September thanks to the strength in the food and beverages section.
The construction sector also looks promising with the employment bit rising by 0.4 in AIG’s construction index. The same component came in flat in AIG’s services index, though it’s still in line with 2019’s averages.
ANZ’s September job ads echoed the same optimism when it reported a 0.3% increase in September after falling by 2.6% in August. Meanwhile, the NAB business confidence report cheered a 3-point increase in the employment section and suggested 18,000 net jobs increase in the next six months.
Impact on RBA’s next steps could dictate AUD’s reaction
We know that the RBA pays extra attention to disposable income and consumer spending patterns. And based on the latest meeting minutes, they aren’t feeling good about labour market prospects.
See, members believe that “[t]he period of strong employment growth had not reduced spare capacity in the labour market significantly,” as higher participation soaked up the extra demand. Public sector pay caps also don’t help in upping overall wages.
They also expect employment growth to “slow over the period ahead,” so much so that “unemployment and inflation outcomes over the following couple of years were likely to be short of the Bank’s goals.”
Governor Lowe summed up their plan when he noted in a post-RBA statement presser that “employment growth is likely to slow from its recent fast rate,” but that “lower interest rates will help make inroads” in achieving the central bank’s unemployment and inflation goals.
So, will a potential upside surprise in this week’s labour market numbers help ease the RBA’s concerns?
If the report’s details (read: full-time work, wages) point to more disposable income, then we could see the Aussie pop higher against its counterparts.
But if this week’s numbers suggest weakening consumer spending power, then more traders would bet on another rate cut from the RBA this year.