With CBA below consensus and Westpac above it, the major banks bracket the market’s 20,000 forecast, so a result anywhere in that band is unlikely to move rate expectations much ahead of next week’s widely expected RBA hike. The bigger swing factor is the unemployment rate: CBA’s view that it needs to drift higher to curb inflation means a surprise dip would strengthen the case for further tightening beyond September, supporting the Australian dollar and short-end yields. A jump toward 4.6% or above would do the opposite, reinforcing the idea that the RBA is nearing the end of its cycle. The pick-up in some job advertisement measures that CBA flags is a reminder that the softening is not one-way.
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Earlier:
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CBA expects Australia’s jobs market to keep easing gently rather than cracking, with unemployment edging up over time, which is exactly what the RBA needs to see.
Summary:
- Australia’s August labour force data are due at 11.30am Sydney time on Thursday 24 September (0130 GMT Thursday, 2130 US Eastern time Wednesday)
- CBA forecasts employment rising by 15,000, below the market consensus of about 20,000 and Westpac’s 30,000
- CBA expects the participation rate to hold at 66.9% (66.85% unrounded), leaving unemployment steady at 4.5%
- The bank’s own wage and labour data suggest employment growth is broadly steady but weaker than recent official figures imply, and some hiring intention surveys have eased
- CBA expects unemployment to grind higher over time, which it sees as necessary to bring inflation down
- Some job advertisement measures have picked up recently, a signal the bank says is worth watching
Commonwealth Bank of Australia expects Australia’s August labour force figures to show modest jobs growth and a steady unemployment rate, consistent with a gradual cooling in the labour market. The data are due at 11.30am Sydney time on Thursday 24 September, which is 0130 GMT on Thursday and 2130 US Eastern time on Wednesday.
CBA forecasts employment rising by 15,000 in August, below the market consensus of about 20,000 and well short of Westpac’s forecast of 30,000. The gain would follow a surprise fall of about 16,000 in July. With the participation rate, the share of working-age Australians in work or actively looking for it, expected to hold at 66.9%, CBA sees the unemployment rate remaining at 4.5%, in line with market expectations.
The bank said its forecast reflects slower economic growth weighing on demand for workers. Its own wage and labour data, drawn from customer banking records, suggest employment growth is broadly steady but somewhat weaker than recent official data have implied. Some surveyed measures of hiring intentions have also eased in recent months.
CBA expects the unemployment rate to keep grinding higher over time, and said that rise is needed to help bring inflation down. However, it cautioned that the signals are not uniformly weak, pointing to a recent pick-up in some measures of job advertisements as something to watch in coming months.
The participation forecast highlights how finely balanced the numbers are. At 66.85% unrounded, CBA’s projected rate sits right at the rounding threshold between 66.8% and 66.9%. July’s unemployment rate was similarly borderline, edging up from 4.43% to 4.46%, just enough to round up to 4.5%. Small shifts in labour supply can therefore move the headline figures more than underlying conditions warrant. August’s data also carry a technical change, with the Australian Bureau of Statistics adjusting its seasonal adjustment approach from this release, which it expects to have a small effect on month-to-month variability.
The release comes days before the Reserve Bank of Australia’s 28 to 29 September policy meeting, where markets widely expect a rate increase. A labour market that is easing gradually, as CBA expects, would support the view that tighter policy is working without causing a sharp downturn, while any sign of renewed tightness could keep further rate rises on the table.
This article was written by Eamonn Sheridan at investinglive.com.