By Stella Qiu
SYDNEY (Reuters) – Australian employment blew past expectations in May, while the jobless rate edged lower and participation rate climbed to a fresh record high, an extraordinarily strong report that would pile pressure on the central bank to raise rates further.
Figures from the Australian Bureau of Statistics (ABS) on Thursday showed net employment rose by 75,900 in May from April, when they fell by a revised 4,000, a result likely due to the Easter holiday. Market forecasts had been for a rise of 15,000.
The jobless rate edged back to near 50-year lows at 3.6%, when analysts had expected a steady 3.7%, and participation rate climbed to a fresh record high of 66.9% from 66.7%, thanks to a greater share of women entering the labour force.
The local dollar reversed earlier losses to be flat at $0.6791, and markets moved to price in an almost split chance that the Reserve Bank of Australia (RBA) would hike interest rates by another quarter-point in July to 4.35%, with rates almost certain to hit 4.6% by November.
Bjorn Jarvis, ABS head of labour statistics, said the job gains over the past two months averaged at about 36,000, in line with gains over the past year.
“The labour market remains very tight, which will contribute to stronger wage growth over 2023,” said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.
The prospect of stronger wage growth underscores the RBA’s warning that more interest rate hikes may be required to curb inflation, even after tightening by 400 basis points to an 11-year high of 4.1%, including a surprise rise earlier this month.
“The RBA has maintained a hawkish tone following the June rate rise, expressing concerns over the persistence of underlying inflation. These data will do nothing to allay those concerns,” Langcake said.
(Reporting by Stella Qiu; Editing by Muralikumar Anantharaman and Sonali Paul)
