Australia’s Unemployment Rate rises to 4.6% in August, vs 4.5% expected

Australia’s Unemployment Rate climbed to 4.6% in August from 4.5% in July, according to the official data released by the Australian Bureau of Statistics (ABS) on Thursday. The figure came in above the market consensus of 4.5%.

Furthermore, the Australian Employment Change arrived at 39.5K in August from a fall of 15.9K in July (revised from -15.8K), compared with the consensus forecast of a 20K increase.

The participation rate in Australia increased to 67.1% in August from 66.9% in July. Meanwhile, Full-Time Employment decreased by 6.3K in the same period from a growth of 14.9K in the previous reading (revised from 16.3K). The Part-Time Employment rose by 45.8K in August versus a decline of 30.8K prior (revised from -32.2K).

Sean Crick, ABS head of labour statistics, said with the key highlights noted below

This August we recorded a higher proportion of people who were previously not in the labour force moving to being unemployed, compared to recent years. 

“Hours worked rose by 14 million hours in August after falling by the same amount in July. This is partly due to having more employed people working zero hours last month compared to usual July months.”

Employment and hours worked are closely aligned in annual growth, up 1.6 per cent and 1.7 per cent respectively. 

Market reaction to the Australia’s employment data

The Australian Dollar (AUD) attracts some sellers following the employment data. At the time of writing, the AUD/USD pair is trading 0.18% lower on the day to trade at 0.7026.

This section below was published at 21:30 GMT on Wednesday as a preview of the Australia Employment report

• The Australian Unemployment Rate is forecast to hold steady at 4.5% in August.
• Australia is expected to have added 20K jobs in the month, after losing 15.8K in July.
• AUD/USD aims lower ahead of the release, with the 0.7000 psychological barrier in sight.

Australia will release the August monthly employment report on Thursday at 01:30 GMT. Ahead of the announcement, analysts expect the country to have added 20K new jobs in the month, while the Unemployment Rate is expected to remain steady at 4.5%. The Australian Bureau of Statistics (ABS) report is also expected to show that the Participation Rate stood at 66.9%, unchanged from the previous month.

ABS separately reports full-time and part-time positions through the monthly Employment Change. Generally speaking, full-time jobs entail working 38 hours or more per week, usually include additional benefits, and typically provide a consistent income. On the other hand, part-time employment generally means higher hourly rates but lacks consistency and benefits. That’s why the economy prefers full-time jobs. In July, Australia lost 32.2K part-time positions and added a modest 16.3K full-time ones.

Australian unemployment rate seen steady in August

The anticipated figures are a modest improvement from the discouraging data posted in July, yet once again, the employment report is unlikely to have a relevant, sustainable effect on the Australian Dollar (AUD).

Employment data will come a week ahead of the Reserve Bank of Australia (RBA) monetary policy meeting. When policymakers met in August, the Board left the Official Cash Rate (OCR) unchanged at 4.35%, citing a softer-than-anticipated impact of the Middle East conflict on inflation. Officials, however, expressed continued concerns, clarifying that “headline inflation is still too high.”

Regarding employment, however, concerns are less: “Labour market conditions have eased by a little more than expected in recent months. Labour market leading indicators point to only limited easing in the near term.”

The Board mandate is to deliver price stability and full employment, yet it remains focused on “ensuring that high inflation does not become embedded,” according to the RBA’s monetary policy statement, which means employment figures have little to no chance of shaping the upcoming central bank decision.

Meanwhile, the US Dollar (USD) trades with a firmer tone across the FX board, pushing AUD/USD to one-month lows below the 0.7100 mark. The Greenback surged amid hawkish comments from Federal Reserve (Fed) officials, and despite hopes for de-escalation in the Middle East.

The Fed pulled the trigger at its early September meeting, hiking the benchmark rate for the first time in three years, now floating in a 3.75%–4.00% range. The widely anticipated move still pushed the Greenback higher, as investors remained uncertain whether policymakers would dare to challenge US President Donald Trump’s wishes for lower rates. Now that they opened the door, market players continue to price in additional hikes before year-end.

Regarding the Middle East war, hopes surged after Iran declared that it could reopen the Strait of Hormuz in a matter of days if the United States (US) eases military pressure and lifts its blockade on Iranian ports. Talks seem to be on between the two countries, boosting expectations of a soon-to-come resolution.

Back to the Australian employment data release, the anticipated figures are expected to have a positive, yet temporary impact. A much better-than-anticipated outcome could spur near-term AUD demand, but whether the currency can sustain those gains will depend on risk sentiment and the current strength of the US Dollar (USD).

When will the Australian employment report be released and how could it affect AUD/USD?

The ABS August employment report will be released early on Thursday. As previously noted, the Australian economy is expected to have added 20K new jobs in the month, while the Unemployment Rate is forecast at 4.5%. Market participants will also watch the breakdown of full-time and part-time positions.

Valeria Bednarik, Chief Analyst at FXStreet, notes: “The AUD/USD pair trades around the 0.7050 region ahead of the announcement, with a clear bearish bias amid persistent USD demand. The pair is currently piercing its 100-day Simple Moving Average (SMA), which slowly turns south, reflecting continued selling interest. AUD/USD is also far below a bearish 20-day SMA currently at around 0.7160. Technical indicators, in the meantime, have turned sharply lower within negative levels, also in line with mounting selling pressure and hinting at lower lows ahead.”

Bednarik adds: “The risk of additional declines will increase if the pair breaks below the 0.7030 level, an immediate support area, while the next relevant hurdle comes at 0.6970. The first line of sellers is located at 0.7100, followed by a stronger one in the 0.7130 region.”