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G’day, forex mates! The Australian Bureau of Statistics (ABS) will be releasing Australia’s latest jobs report this Thursday at 12:30 am GMT, which means that the Aussie will likely get a volatility boost.

And if you’re planning to trade this top-tier event, and if you need to get up to speed on what happened last time and what’s expected for the upcoming jobs report, then this Event Preview will help you out.

What happened last time?

  • Sept. employment change: +5.6K vs. +15.2K expected
  • Aug. employment change: upgraded from +44.0K to +44.6K
  • Jobless rate: 5.0% vs. steady at 5.3% expected
  • Labor force participation rate: 65.4% vs. 65.7% previous

Australia’s September jobs report revealed that the Australian economy only saw a net increase of 5.6K jobs, significantly missing expectations that Australia generated around 15.2K in September.

However, other details of the jobs report were more positive since jobs growth in August was upgraded slightly from +44.0K to +44.6K.

More importantly, full-time employment actually increased by 20.3K in September, which marks the fourth consecutive month of increases in full-time jobs.

It just so happens that the steady increase in full-time employment was partially offset by the loss of 14.7K part-time jobs, resulting in the net employment change of only 5.6K.

Moreover, the jobless rate improved from 5.3% to 5.0%, which is the best and lowest reading since April 2012.

However, it’s a bit disappointing that the improvement in the jobless rate was partially due to the labor force participation rate deteriorating from 65.7% to an 11-month low of 65.4%.

In summary, net employment change in September failed to meet expectations, but the jobs report was still somewhat good overall since full-time employment continued to grow and the jobless rate fell to multi-year lows.

And oddly enough, there was no knee-jerk reaction to the miss in net employment change since the Aussie just jumped higher across the board when the jobs report was released.

Overlay of AUD Pairs: 15-Minute Forex Chart
Overlay of AUD Pairs: 15-Minute Forex Chart

Bears did try to fight back since the lower jobless rate was partially due to the participation rate slumping to multi-month lows and jobs growth did fail to impress.

However, follow-through buying was stronger, likely because gold prices were turning higher and risk-taking was the prevailing sentiment back then.

What is the market expecting this time?

  • Employment change: +20.3K expected vs. +5.6K previous
  • Jobless rate: 5.1% expected vs. 5.0% previous
  • Labor force participation rate: 65.5% expected vs. 65.4% previous

For this Thursday’s jobs report, most economists forecast that the Australian economy generated around 20.3K jobs, which is more than the 5.6K increase reported in September.

Despite expectations for stronger jobs growth, economists also forecast that the jobless rate will deteriorate from 5.0% to 5.1%. And that’s because the labor force participation rate is expected to improve from 65.4% to 65.5%.

So, what do the available leading indicators have to say?

  • The employment sub-index of AIG’s performance of manufacturing index (PMI) fell by 5.4 index points to 52.6. The reading is still above the 50.0 stagnant level, so employment in the manufacturing sector continued to grow, albeit at a slower pace.
  • The employment sub-index of AIG’s performance of construction index (PCI) rose by 1.1 index points to 48.0, so payroll numbers are still shrinking (but at a slower pace).
  • As for the employment sub-index of AIG’s performance of services index (PSI), that jumped by 7.5 index points to 57.3, so jobs growth ramped up in the service sector.
  • The employment sub-index of the NAB monthly business survey fell from 11 index points to just 7, so jobs growth slowed according to NAB’s findings.

How about historical tendencies? Do they offer additional insights?

Historically, jobs growth in October has been weaker when compared to jobs growth in September. However, that historical tendency hasn’t been holding up too well in the last five years. In fact, jobs growth was stronger in October from 2014 until 2016.

As to how economists fared with their guesstimates, well, economists appear to have a slight tendency to be too pessimistic since there are slightly more upside surprises over the years. However, this historical tendency also hasn’t been holding up too well recently since there are more downside surprises in the last five years.

In summary, the available leading indicators are mostly pointing to weaker jobs growth in October, which is contrary to the consensus that jobs growth picked up the pace.

Historical data also appear to side more with the leading indicators since jobs growth in October has historically been weaker compared to September. However, it’s worth highlighting that such a tendency hasn’t been holding up too well in recent years.

Also, historical trends show that economists have a slight tendency to undershoot their guesstimates, which skews probability more towards a possible upside surprises.

But as always, just remember that we’re playing with probabilities here, so the risk for an downside surprise is still there. And all the more so, given that there have been more downside surprises in the last five years.

Also as always, do keep in mind that the Aussie usually (but not always) has an initial reaction depending on how the reading for net employment change turns out.

As for follow-through buying (or selling), that usually depends on whether or not full-time employment continued to grow.

However, make sure to keep an eye on overall risk sentiment and gold prices since the Aussie also takes directional cues from those. Be particularly keen on any trade-related news since the Aussie has been rather sensitive to that lately, especially if it involves the ongoing trade war between the U.S. and China.

And if you didn’t know, you can keep an eye on those in our Live Market Rates.