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Surge in employment removes pressure on the RBA to opt for further easing immediately

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 12, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Mumbai) - Australia is poised to witness best jobs growth this year since 2010 as weak wages and improving sentiment continues to encourage businesses to hire. Government data showed employers added 231,700 jobs in the first 10 months of the year. The job data released today is likely to take the pressure to ease off the central bank.

    However, some economists have expressed doubts about the accuracy of the October report. The statistics bureau has in the past admitted to problems related to compiling of jobs data. According to Westpact “the ABS is still having problems with the original data following changes to the supplementary surveys." Westpac is thus cautious about reading too much into today's very strong jobs data.

    Surge in employment

    Employment rose 58,600 from September. Jobless rate dropped to 5.9 per cent from 6.2 per cent, matching expectations of economists. Full-time jobs rose by 40,000 while part-time employment increased by 18,600
    Participation rate also rose to 65.0 per cent from 64.9 per cent. Economists had predicted 64.9 per cent rise in participation rate. As per the data, monthly hours worked in all jobs increased by 19.1 million hours, or 1.2 per cent.

    The south-eastern state of Victoria added 26,100 jobs in October and its unemployment rate fell by 0.7 point to 5.6 per cent. New South Wales added 18,700 in the month as its jobless rate fell to 5.5 per cent from 5.8 per cent. Both states have been witnessing a boom in the housing sector. Whereas in the mining state of Western Australia, the unemployment rate rose to 6.4 per cent from 6.1 per cent, highlighting the efforts in re-balancing of economic activity away from the resources sector.

    RBA’s decision to hold rates justified

    A surge in the housing construction and tourism industries are soaking up former mine workers, resulting in a healthy employment data. Consumer sentiment has also risen 3.9 per cent in October as optimists outweighed pessimists. These data have justified the RBA’s decision to keep its benchmark rate at a record low of 2 per cent.

    The RBA has signaled its willingness to continue its accommodative policy stance. It is not likely that the central bank will abandon its easing bias on the basis of one month’s jobs data. The data however will definitely ease the pressure on the RBA to opt for further monetary easing right away. Further rate cuts are thus unlikely this year.
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