Australia’s Unemployment Rate steadied at 4.1% in in February from 4.1% in January, according to the official data released by the Australian Bureau of Statistics (ABS) on Thursday. The figure came in line with the market consensus.
Furthermore, the Australian Employment Change arrived at -52.8K in February from 44K in January, compared with the consensus forecast of 30K.
The participation rate in Australia declined to 66.8% in February, compared to 67.3% in February. Meanwhile, Full-Time Employment decreased by 35.7K in the same period from a rise of 54.1K in the previous reading.
Market reaction to the Australia’s employment data
The Australian Dollar (AUD) attracts some sellers following the employment data. At the time of writing, the AUD/USD pair is trading 0.52% lower on the day to trade at 0.6343.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
