Australia: Third strong jobs report in a row with May report being a cracker - TDS

Another strong Aussie jobs print, surpassing street expectations by a country mile as the data for May was better across nearly all metrics along with positive revisions for April, explains the analysis team at TDS.

Key Quotes

“What’s not to like? Those looking for a rate cut this year have their hopes dashed.”

“Headline employment rose +42k in May, exceeding TD’s +20k and the market’s +10k forecast. The gain was entirely driven by Full time Employment, rising +52.1k. Part time dropped -10.1k, but this is not a big deal given the outsized full time gain.”

“Annual employment growth is now running at 2%, the highest since Mar 2016. This brings employment growth in line with ANZ jobs ads. In contrast the annual growth in full time jobs has clearly exceeded that implied by the partials. Give back later? Perhaps. Full time jobs account for 70% of all new jobs created this year.”

“Underscoring the strong result, the unemployment rate dropped to 5.5% from 5.7%, a 4yr low even with a bump up in the participation rate from 64.8% to 64.9%. The RBA highlighted hours worked as a metric they are monitoring in last week’s RBA statement and this rose nearly 1.9% on the month.”

“Nearly all states are adding to full time jobs. NSW is progressively adding more full time jobs each month this year while momentum is levelling out across other states. Only SA is not adding to the full time ledger.”

“The ABS also released quarterly data on Underemployment, an additional measure the RBA is monitoring to gauge slack in the economy. This also dropped from 8.8% to 8.7%. Along with the unemployment rate declining, this saw the underutilisation rate drop to 14.4% from 14.8%.”

“In FX, we see near upside risk for the AUD and AUDNZD to US$0.7680 and NZ$1.06 respectively. In rates, we are have been reluctant to chase the rally, preferring flatteners instead. This trade should continue to perform as rich levels for short and mid curve bonds are unwound.”