Australia unemployment rate set to slightly rise as RBA considers timing for interest-rate cut

• The Australian Unemployment Rate is foreseen at 4% in December. 
• Employment Change is expected to include a large increase in full-time jobs.
• AUD/USD corrected from multi-year lows, sellers retain control.

The Australian Bureau of Statistics (ABS) will release the December monthly employment report at 00:30 GMT on Thursday. The country is expected to have added     15K new job positions, while the Unemployment Rate is expected to tick higher from the 3.9% posted in November to 4.0%. The Australian Dollar (AUD) is at around 0.6200    against the US Dollar (USD), not far from a fresh multi-year low of 0.6130 posted in early January. 

The ABS Employment Change report separates full-time from part-time jobs. According to its definition, full-time jobs imply working 38 or more hours per week and usually include additional benefits, but they mostly represent consistent income. On the other hand, part-time employment generally offers higher hourly rates but lacks consistency and benefits. This is why full-time jobs are given more weight than part-time ones when setting the directional path for the AUD. 

In November, Australia created 35.6K new job positions, adding 52.6K new full-time positions and losing 17k part-time ones. 

Australian Unemployment Rate seen up in December

The Australian Unemployment Rate stood between 4% and 4.2% between April and September 2024, and the decline to 3.9% in November was a positive surprise. The anticipated 4% in December, despite being higher than the previous, is not a level that could trigger any concerns. 

Meanwhile, the Reserve Bank of Australia (RBA) has decided to leave the cash rate target unchanged at 4.35%. On the one hand, the Board welcomed that inflation “has fallen substantially since the peak in 2022,” with headline inflation at 2.8% over the year to the September quarter. However, underlying inflation stood at 3.5% in the same period, “still some way from the 2.5% midpoint of the inflation target.” The RBA maintained its inflation forecast, indicating that price pressures won’t fall significantly within the target band until 2026. 

Regarding employment, policymakers noted that a range of indicators suggest that labour market conditions remain tight. “The unemployment rate was 4.1% in September, up from the trough of 3.5% in late 2022. But the participation rate remains at record highs, vacancies are still elevated and average hours worked have stabilised. At the same time, some cyclical measures of the labour market including youth unemployment and underemployment have recently declined,” the monetary policy meeting statement reads. 

The monthly report does not include wage growth. Such figures are released on a quarterly basis and the latest one showed the annualised Wage Price Index at 3.5%, also above the desired 2.5% midpoint.

Finally, it is worth remembering that financial markets are looking elsewhere: United States (US) President-elect Donald Trump will take office next Monday and pledged to impose massive tariffs. Risk aversion dominates financial boards amid fears his policies will push inflationary pressures up. As a result, the USD reached fresh multi-month highs against most major rivals this week and market players suspect the USD rally is far from over. 

When will the Australian employment report be released and how could it affect AUD/USD?

The ABS will publish the December employment report early on Thursday. As previously stated, Australia is expected to have added 15K new job positions in the month, while the Unemployment Rate is foreseen at 4.0%. Finally, the Participation Rate is expected to hold at 67%.

Generally speaking, a better-than-anticipated employment report will boost the AUD, even if the more significant increase comes from part-time jobs. However, the advance could be more sustainable if the increase comes from full-time positions. The opposite scenario is also valid, with soft figures weighing on the Australian currency. At this point, the report has no chance of impacting the upcoming RBA decision. 

As mentioned, the AUD/USD pair trades around the 0.6200 mark, not far from an almost four-year low of 0.6130. According to Valeria Bednarik, Chief Analyst at FXStreet, “the current AUD/USD advance seems corrective, given the USD extreme overbought conditions. Caution ahead of Trump’s government favors demand for safe-haven assets.”

Bednarik adds: “From a technical point of view, AUD/USD could soon resume its decline. The daily chart shows that it is up for a third consecutive day, yet still below all its moving averages. A firmly bearish 20 Simple Moving Average (SMA) provides near-term dynamic resistance at around 0.6220. At the same time, the 100 SMA is crossing below the 200 SMA, although both of them develop over 300 pips above the current level, in line with the dominant bearish trend. Finally, technical indicators corrected extreme oversold conditions, but remain within negative levels.”

“A critical resistance comes at 0.6301, January 1st top. Sellers will likely reappear around it, should strong employment figures push it higher. The immediate support, on the other hand, is the January 14 low at 0.6160, followed by the mentioned 0.6130 low. A break below the latter exposes the psychological 0.6000 mark.”