(Bloomberg) — Australian employment surprisingly dropped in February, sending the currency and government bond yields lower and validating the Reserve Bank’s decision to cut interest rates.
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Employment declined by 52,800 — led by full-time roles — compared with a forecast 30,000 increase, data from the statistics bureau showed on Thursday. The jobless rate held at 4.1% as expected, reflecting a fall in participation.
“Fewer older workers returning to work in February contributed to the fall in employment,” said Bjorn Jarvis, ABS head of labor statistics. “This follows higher levels of employment in these age groups in recent years, particularly in 2024.”
The Australian dollar fell 0.4% while yields on policy sensitive three-year bonds slid as traders lifted expectations of RBA rate cuts this year. Markets have fully priced the next reduction will be in July with a 74% chance it will occur at the May meeting, up from a roughly two-in-three chance prior to the release.
The result follows the RBA’s decision to cut the cash rate by a quarter percentage-point to 4.1% on Feb. 18 as it gains confidence that inflation is steadily easing. At the same time, global markets have been roiled by a spate of tariff announcements and threats from the Trump administration that targeted US allies such as Europe and Canada and competitors like China.
A weaker labor market comes at a difficult time for Prime Minister Anthony Albanese’s Labor government as it prepares for an election due by mid-May. The opposition Liberal-National coalition holds a slight edge in polls with the government having been blamed for rising living costs over the past couple of years due to high inflation and elevated borrowing costs.
In general, Australia’s job market has remained surprisingly resilient over the past couple of years, coping with higher borrowing costs and weaker growth.
Even after reducing rates last month, Governor Michele Bullock remained cautious on the prospect of further easing, worrying that prolonged tightness in the labor market could rekindle price pressures. The RBA’s next meeting will take place over March 31-April 1.
Thursday’s jobs report also showed:
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Annual employment growth was 1.9%
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The participation rate fell to 66.8% from a revised 67.2%
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Full-time roles dropped by 35,700, while part-time roles slid by 17,000
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Underemployment decreased to 5.9%
