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Australia’s labour market report for December was strong following a soft November release. The monthly numbers can jump around but the unemployment rate declined a little in Q4 as a whole.
Our view has been that markets have been under-pricing the chances of a cash rate hike in February and today’s data don’t dissuade us from that view. Markets are now factoring in more than a 50% chance of a Feb hike - still looks a bit low given our and broader expectations of a strong Q4 trimmed mean CPI print next week.
1. Australia’s unemployment rate declined 0.2ppts to 4.1% in December. Monthly volatility suggests that this may overstate true improvement in the month, particularly given seasonal adjustment can be tricky around the turn of the year.
Measured employment rose +65.2k m/m, resulting in a +0.2ppt increase in the employment-to-population ratio to 64.0%.
The participation rate rose only +0.05ppts to 66.7%.
2. The quarter-average unemployment rate was 4.25% compared with the ~4.35% pencilled in by the RBA in the November SMP.
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