Summary of Australia’s November Labour Market Performance and Its Economic Implications
In November, Australia experienced a surprising strength in its labor market, with the Australian Bureau of Statistics reporting a net addition of more than 50,000 full-time jobs. This development has tempered expectations of the Reserve Bank of Australia (RBA) initiating early interest rate cuts. Reflecting the positive employment figures, the stock market saw a decline while the Australian dollar gained strength following the news.
Key Labor Market Statistics
November’s unemployment rate fell to 3.9%, contrary to economists’ predictions that it would rise to 4.2% from October’s figure of 4.1%. The economy added a total of 35,600 jobs for the month, significantly surpassing the anticipated increase of 25,000 positions. Additionally, the net increase in full-time jobs reached 52,600, continuing a stable trend of job growth across 2024, except for March.
Russel Chesler, head of investments and capital markets at VanEck, remarked on the labor market’s resilience, stating it seemingly “defies gravity.” He indicated that the sustained low unemployment rate reduces the likelihood of an RBA rate cut in the near future. The RBA’s expectations had anticipated a gradual cooling of the labor market, projecting an increase in the quarterly unemployment rate to 4.5% by the end of 2026, with a forecast that the rate would conclude 2024 at 4.3%. Given the latest employment figures, achieving such outcomes now appears questionable without significant job losses in December.
Impacts on Monetary Policy and Market Reactions
The unexpected strength of job statistics dampened earlier expectations that the RBA would cut its key interest rate early in 2025 to mitigate further economic slowdown. Economic performance over the September quarter had already shown slow GDP growth, at just 0.8%, marking the poorest results outside of the COVID-19 pandemic since the early 1990s. As a result, prior to the release of the labor market statistics, market analysts had strongly anticipated a rate cut, expecting a more than 75% chance for action during the RBA’s upcoming meeting.
Following the announcement of the positive job figures, the stock market reversed its positive trend, dropping significantly. This reaction can be explained by the relationship between interest rates and stock market performance—higher rates can constrain future profitability forecasts. In contrast, the Australian dollar appreciated, climbing above 64 U.S. cents.
Chief Financial Officers’ Perspectives and the Job Market Overview
Adding to the economic sentiment, a Deloitte report indicated that chief financial officers were becoming increasingly optimistic about the state of the economy. However, they identified securing and retaining top talent as one of their foremost concerns. The participation rate in the labor market eased slightly to 67%, remaining near the record high of 67.2%, a level seen throughout much of 2024.
Paula Gadsby, a senior economist at EY, characterized the labor market’s latest data as indicative of a “remarkably resilient and tight jobs market.” Despite signs of a gradual slowdown in economic activity, the demand for workers has remained strong, particularly in essential non-market sectors such as healthcare and education. She projected that the RBA would likely maintain its current interest rates through the first quarter of the following year and possibly beyond.
Future Projections and Conclusion
David Bassanese, chief economist at Betashares, labeled the November job figures as “blockbuster” and believed they pushed back expectations for a February rate cut toward May. He pointed to the discrepancy between weak GDP growth and solid employment growth as a peculiar economic dynamic, noting that annual employment growth has outpaced quarterly GDP expansion significantly.
Moving forward, Bassanese emphasized that for the RBA to consider a rate cut as early as February, the Consumer Price Index (CPI) report due in late January would need to display a notably low figure. The current economic climate presents a complex interplay between robust employment figures and economic growth challenges, highlighting the delicate balancing act the RBA faces in shaping monetary policy under these conditions.
