Australia Sees Surprise Job Loss in February, But Unemployment Remains Steady

February’s employment data from Australia revealed surprising weakness with employment decreasing by 52,800, after a trend of strength. In terms of the unemployment rate, the number remained stable at 4.1%, in line with the market’s expectations suggesting that the job market itself is still relatively stable.

The weak employment figures pushed the Australian dollar lower by 0.4% to $0.6334, as government bond yields rose. Financial markets boosted expectations that the Reserve Bank of Australia (RBA) may cut interest rates in May, raising the implied chance to 78%, up from 70%.

The Australian Bureau of Statistics (ABS) reported that job growth annually fell from 3.5% in January to a sharp 1.9%. The participation rate fell from a record 67.2% to 66.8% as older workers returned to their jobs at a slower pace.

Nevertheless, ANZ analysts still believe that the broad fundamentals of the labor market remain strong. Wage growth is slowing, but measures of underemployment improved modestly. Following its rate cut last month, the RBA is cautious about further easing with inflation entrenched.

Economists believe the job loss may not indicate a cyclical downturn but rather a temporary transition, with employment still very good from a historical perspective.