Australian unemployment hits 4-year high, rate cut back in play

By Stella Qiu SYDNEY (Reuters) -Australia's unemployment rate spiked unexpectedly to a near four-year high in September as more people went looking for work, a weak result that revived hopes for more policy easing. Investors ramped up bets for a rate cut from the Reserve Bank of Australia in November to 72%, from just 40% before the data. Prospects for more easing had faded as policymakers fret about sticky inflation and a sharp revival in consumer spending. The Australian dollar slipped 0.2% to $0.6497, while three-year bond futures rallied 10 ticks to 96.62. The heightened expectations of a rate cut pushed the local stock benchmark to a record high. Figures from the Australian Bureau of Statistics out on Thursday showed net employment rose 14,900 in September from August, when it fell a revised 11,800. That was under market forecasts for a 20,000 gain. Most crucially, the jobless rate jumped to 4.5%, the highest since November 2021 and against forecasts of 4.3%, which was the peak forecast by the RBA. The central bank has said the monthly jobs reports are volatile but employment growth has slowed sharply this year to just 1.3% in September, compared with 3.5% in January. "The RBA is increasingly caught between a rock and a hard place," said Harry Murphy Cruise, head of economic research for Oxford Economics Australia. "Inflation looks set to come in hotter than the Bank’s latest forecasts, while the labour market is weaker than expected … We maintain our view that a rate cut is warranted in November." The RBA held rates steady at 3.60% in September, having cut three times so far this year, awaiting more inflation data. Core inflation had fallen to 2.7% in the second quarter, back in the RBA's target range of 2% to 3%, but recent monthly data pointed to a risk it had not declined further in the third quarter. The central bank had judged the labour market to be nearly in balance, while demand in some industries was still running hot. However, the latest private data showed the number of job ads dropped 3.3% in September, the biggest monthly decline since early 2024. "The RBA have noted that some cooling within the labour force was expected. But nowhere within its most recent forecasts did they project the unemployment rate rising to anywhere near 4.5% – not this year, not next year and not in 2027," said Tony Sycamore, analyst at IG. "The RBA now finds itself in a very awkward position." Much focus is now on the third quarter inflation report due at the end of October where any downside surprises may pave the way for a rate cut in November. Earlier in the day, Governor Michele Bullock said a pickup in consumer spending and higher readings on some parts of inflation had given policymakers pause to consider whether further interest rate cuts were needed. Thursday's report showed the labour force grew a sizable 48,800 as more people went looking for work. Full-time jobs gained 8,700 after a steep drop the previous month, while part-time roles rose by 6,000. Hours worked rose 0.5%, reversing a drop in August. (Reporting by Stella Qiu and Wayne Cole; Editing by Kim Coghill, Sam Holmes and Sonali Paul)

(The article has been published through a syndicated feed. Except for the headline, the content has been published verbatim. Liability lies with original publisher.)