Asia Economy

Australian jobless rate hits near 8-year low, tempering rate cut bets

Key Points
  • Australia's jobless rate fell to a near eight-year low in February as a bumper run in employment extended.
  • A total 4,600 net new jobs were created in February with all of the increase led by part-time work, according to the Australian Bureau of Statistics (ABS) report on Thursday.
  • This sent the local dollar sharply higher on expectations the country's central bank won't cut interest rates any time soon.
A pedestrian walks past the Reserve Bank of Australia (RBA) headquarters in the central business district of Sydney, Australia, on Friday, Jan. 11, 2019.
Lisa Maree Williams | Bloomberg | Getty Images

Australia's jobless rate fell to a near eight-year low in February as a bumper run in employment extended, sending the local dollar sharply higher on expectations the country's central bank won't cut interest rates any time soon.

A total 4,600 net new jobs were created in February with all of the increase led by part-time work, according to the Australian Bureau of Statistics (ABS) report on Thursday.

Although February's performance was a pale shadow to the downwardly revised 38,300 employment growth recorded the previous month, the data showed the overall trend in the labor market was still positive.

Australia is creating jobs at a brisk annual pace of 2.3 percent, faster than the 1.6 percent rise in population.

Even so, the participation rate fell to 65.6 percent from 65.7 percent as fewer people went looking for work. That sent the jobless rate to the lowest since June 2011 at 4.9 percent.

The jumped 0.6 percent to $0.7155, near a one-month high as the data tempered market expectations that the Reserve Bank of Australia (RBA) would cut the benchmark interest rate from its current record low.

The employment report has become increasingly important for monetary policy as the country's central bank is counting on labor market strength for a long-awaited pick up in wage growth and inflation in the face of a property market downturn.

The RBA has held the cash rate at an all-time low of 1.50 percent for 2-1/2 years now and just last month switched away from its long-held tightening bias to a more neutral stance.

Yet, leading indicators of labor demand point to a slowdown in employment growth. Business confidence and conditions have pulled back from peaks touched last year and the number of job advertisements have declined.

Separate data out on Wednesday showed an index of vacancies released by Australia's department of jobs and small business eased in February for the second consecutive month, although there still was a healthy 179,100 skilled job vacancies advertised across the country.

For now, the RBA will take solace from the lower unemployment rate and still-strong jobs growth, even though the overall economy has hit a soft patch.