Heads up, Aussie traders! The Land Down Under is gearing up to publish its employment numbers for the month of July.
Did the pandemic continue to wreak havoc on the labor market for yet another month? Or has there been another strong pickup in hiring?
Here are the points you need to know:
AUD shrugged off previous upside surprise
The Australian economy added 210.8K jobs in June, making up for most of the earlier losses and beating the consensus of a 106K rebound.However, the May reading was downgraded to show a larger 264.1K decline in employment from the initially reported 227.7K drop. Also, the unemployment rate rose from 7.1% to 7.4% – its highest level since 1998 – versus the 7.2% estimate.
A closer look at the components of the previous employment change report reveals that the labor force participation rate actually ticked higher from 62.7% to 64% as more Australians actively looked for work in June.
Still, the Aussie seemed mostly indifferent to the positive points of the release and proceeded to edge lower against most of its forex peers throughout the day.
Analysts point to the participation rate still being around 2% below pre-pandemic levels as one factor that likely bummed AUD bulls out. Besides, the labor market is also a long way off from recovering nearly 900K jobs lost in April and May.
Weaker increase in hiring expected for July
Aussie traders don’t seem to want to get their hopes up for a strong employment gain for last month!Number crunchers predict that only 30K positions were added in July, a far cry from the earlier triple-digit increase, and nowhere near enough to make up for COVID-related layoffs.
Keep in mind that Australia recently tightened its lockdown measures once more on account of the resurgence in confirmed coronavirus cases in several states.
Do leading indicators support weaker expectations for job creation?
The AIG manufacturing index improved from 51.5 to 53.5 in July, partly lifted by a slight pickup in employment from the previous month.
Job advertisements based on data from ANZ also slowed in July at a 16.7% uptick versus the earlier 41.4% jump.
RBA ain’t optimistic about employment
Central bank officials seem to be bracing themselves for weak labor prospects for the foreseeable future, pricing in a 10% unemployment rate scenario in their outlook for 2020.
In their quarterly statement on monetary policy, the RBA noted that “the scale of job losses to date and the increase in unemployment would have been much greater were it not for the JobKeeper program.”
Another program called JobMaker was introduced in late June to help mitigate the aftermath of wide-scale layoffs in the country. However, this is focused mainly on skills training and wouldn’t likely have an immediate impact on July numbers.Are we likely to see an upside surprise in jobs numbers this week? And can this help ease the RBA’s concerns and boost the Aussie across the board? Probably not.
Even if the Land Down Under’s job figures do come in stronger than expected, RBA officials and AUD traders have likely warmed up to the idea of seeing a prolonged downturn in hiring for the rest of the year.
With that, any bounce from strong results could be short-lived while a bearish reaction from a lower-than-expected read or an actual decline in employment could generate a larger price reaction.