The Australian labor force tone continued to be relatively positive. The February jobless rate fell 0.2ppts to 5.8%, implying that underlying labor market conditions continue to be healthy and enough to keep the central bank on the sidelines for the time being. The slow employment growth possibly reflects certain payback after the surprising strength recorded towards late 2015. However, measured growth of employment still averaged a strong 19k in the six months to February.
In recent months, non-ABS labor market indicators have been mixed and seem to have slowed down. ANZ job ads growth, in particular, has slowed down, while trend measures of capacity utilization and business profitability have also slowed. In all, majority of indicators continue to hint at reasonably underlying employment growth in the near term, though at a moderate rate as compared to the pace recorded in late 2015.
The Reserve Bank of Australia continues to link monetary policy to the rebound of labor market conditions. The trend of rebound in the jobless rate at this stage will be enough to keep the central bank on the sidelines for some time.
The recent communications from RBA implies that it continues to be confident that growth in employment will continue to be healthy in near term. However, it is less certain regarding additional declines in the jobless rate. Monetary policy’s outlook path will very much depend on if additional inroads in to unemployment can be made.
