A drop in Australia’s jobless rate to multi year-lows throws cold water on the likelihood of a rate cut in May.
The unemployment rate fell to 5.7 per cent in March, the best result since September 2013 and beating analysts expectations.
ANZ senior economist Justin Fabo says the Reserve Bank has been keenly watching for further momentum in the labour market, and Thursday’s print will be encouraging.
“This will keep the RBA on the sidelines even if inflation prints low (later in April),” he said.
Before Thursday’s employment report, the market was pricing in a 23 per cent probability of a May rate cut.
That had now dwindled to 16 per cent, National Australia Bank senior economist David de Garis said.
Jobs growth also bounced in March, after a recent run of soft prints following a surge of nearly 300,000 over 2015.
The total number of people with jobs rose by a better-than-expected 26,100 in March, the Australian Bureau of Statistics figures show.
Mr de Garis said leading indicators of labour demand suggest there’ll be further employment growth ahead.
“We saw that with the ABS job vacancies last week, and our NAB survey employment index this week, and the SEEK job ads out today,” he said.
JP Morgan economist Tom Kennedy said part-time employment boosted the overall jobs growth, and had been broadly stronger over the past two years.
The number of part-time jobs was up by 34,900 in March, while full-time employment fell by 8,800 positions.
“When growth is soft, businesses are cautious,” he said.
“They don’t want to permanently increase their headcount. They’d prefer to hire part-time workers and keep this transitionary workforce in play.”
CommSec chief economist Craig James said the March result would provide a big boost to consumer confidence.
“And, as we saw over the latter part of 2015, job security plays a big part in household consumption,” he said.
“While we expect employment to strengthen over 2016, it is likely that employers will be more circumspect in hiring given the uncertainty around the timing of the Federal Election,” he said.
The participation rate, which refers to the number of people either employed or actively looking for work, was steady at 64.9 per cent in March.