The unemployment rate remained flat in October at 4.1 per cent, with employment growth moderating to 16,000, according to data from the Australian Bureau of Statistics (ABS).
While consensus was for an unemployment rate of 4.1 per cent, employment was expected to peak at around 25,200.
The unemployment rate has averaged 4.1 per cent since April 2024 – it briefly reached 4.2 per cent in July 2024.
Commenting on the figures, HSBC’s Paul Bloxham noted that the unemployment rate has remained stable at its current level for the past seven months, suggesting that the loosening of the jobs market may have stalled.
“The unemployment rate remains low and is steady, other measures of spare capacity are tracking sideways, employment growth is positive, and the participation rate remains elevated. If the loosening has indeed stalled, this increases the risk that the RBA will not be able to cut its cash rate,” Bloxham said.
“In short, the jobs market is still at, or slightly beyond, ’full employment’ and does not appear to loosening further at this stage.”
He opined that if the jobs market doesn’t loosen further, then rate cuts may not happen at all.
Krishna Bhimavarapu, APAC economist at State Street Global Advisors, agreed that the current unemployment rate does not support a rate cut in the near term.
“With the RBA lowering their GDP forecasts recently, it signals that the bank is comfortable remaining restrictive for an extended period,” Bhimavarapu said.
Similarly, VanEck portfolio manager Cameron McCormack stated that the latest data provides the RBA with little incentive to bring forward its rate easing timeline.
“The strength in the labour market continues to exert upward pressure on already elevated services inflation, which hinders the progress of inflation reducing to the RBA’s target 2–3 per cent range. This reinforces our view that a rate cut is unlikely until late next year,” McCormack said.
The market is currently forecasting the first cut for August 2025.
Until the latest consumer price index (CPI) print, CBA had predicted a rate cut before Christmas. While the bank’s updated forecast now expects a cut in February, Belinda Allen noted on Thursday that for this to occur, the RBA will likely need to see a further increase in the unemployment rate from 4.1 per cent, along with a moderation in trimmed mean CPI.
“For the unemployment rate to average 4.3 per cent in Q4 24 [assuming an unchanged participation rate], employment growth would need to average just under 15k the next two months,” she said.
CBA’s peer, NAB, on Thursday became the first big four bank to push out its rate cut forecast to May 2025. On the back of the unemployment print, NAB said: “Inflation data shows some persistent pressure across components sensitive to domestic demand and labour costs.
“Combined with the resilience evident in recent labour market data, we think the RBA would need to be concerned about sharper weakening in the labour market to decide to cut as soon as February, with May being more likely.”
