Strong Labor Data in Australia Strengthens Interest Rate Cut Expectations for February

Forex - Australia's labor market continues to challenge a weak economy; unemployment sharply fell in November as strong employment growth persisted. According to data released by the Australian Bureau of Statistics (ABS), the unemployment rate dropped to 3.9% last month from 4.1% recorded in October. Economists had anticipated an increase in unemployment rate to 4.2%, in line with recent data indicating the economy was struggling to gain traction in the third quarter.

The Australian economy grew 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 that employment increased by an additional 35,600 positions in November. The Australian dollar rose by 0.6% following the data.

Confirmation that the labor market remains robust came just days after the RBA expressed a more moderate assessment of the economy and increased confidence that inflation would return to target as expected. Comments created excitement in the money markets, with bets quickly rising that the RBA would cut interest rates in February.

David Taylor, the head of Labor Statistics at ABS, stated, "In November, we saw a higher-than-normal number of people who were unemployed and expected to start working in October, finding jobs." ABS indicated 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 fell by 0.1 percentage points to 67.0%, down from the historic high of 67.1% recorded in September.