Fall in Australia’s unemployment rate sends dollar higher and stocks down, dimming hopes of interest rate cut
A surprisingly robust labour market in November, including more than 50,000 additional full-time jobs, has set back hopes of an early move by the Reserve Bank to cut interest rates. Stocks sank and the dollar rose.
The jobless rate last month dropped to 3.9%, the Australian Bureau of Statistics reported on Thursday. Economists had forecast the rate would rise to 4.2% from October’s 4.1% level.
The economy added a net 35,600 positions in November, including 52,600 full-time positions. Economists had expected payrolls would swell by a net 25,000, extending the run of job gains for every month so far in 2024 bar March.
The relatively robust labour market numbers deflated some of the expectations the Reserve Bank would start cutting its key interest rate early in 2025 to ensure the economy does not slow too rapidly.
the RBA capped a calendar year of leaving interest rates unchanged
but said it was “gaining some confidence that inflation is moving sustainably towards target”.Prior to today’s jobs figures, investors were betting there was more than a three-in-four chance the central bank would cut its cash rate when its board next meets on 17-18 February. A rate reduction was fully priced in for the board’s following two-day meeting that will conclude 1 April, according to the ASX’s rates tracker.
Stocks, which had been 0.3% higher for the day, shed all their gains and then some. Higher interest rates squeeze forecast profits.