Strong Labor Force Data in Australia Supports Rate Cut Expectations for February

Forex - Australia's labor market continues to challenge a weak economy; the unemployment rate sharply fell in November as strong employment growth persisted. According to data released by the Australian Bureau of Statistics (ABS), the unemployment rate returned to 3.9% last month from the 4.1% level seen in October. Economists had expected the unemployment rate to rise to 4.2%, consistent with recent data indicating the economy struggled to gain traction in the third quarter.

The Australian economy grew by only 0.8% over the year in the third quarter; this pace was last seen during a recession in the early 1990s. Despite this slow growth, the U.S. reported an increase of 35,600 jobs in November. The Australian dollar rose by 0.6% following the data.

Confirmation of a resilient labor market came just days after the RBA expressed a more moderate view of the economy and increased its confidence that inflation would return to target as expected. Comments generated excitement in the money markets, with bets on an interest rate cut by the RBA in February surging.

David Taylor, Head of Labor Statistics at ABS, stated, "In November, we saw a larger-than-normal number of people who were unemployed and expected to start work in October entering employment." ABS reported that employment increased by 0.2% in November, aligning with the recent population growth, following an average monthly increase of 0.3% since mid-2024.

The labor force participation rate slipped 0.1 percentage points to 67.0% in November, down from a record high of 67.1% in September.