Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities, notes that the Australia’s headline April employment change of 28.4k was positive but the details of the report were not.
“Full time employment dropped -6.3k in April, the unemployment jumped to 5.2% (due to a pick up in the participation rate from 65.7% to 65.8%) and the unemployment rate for Mar was revised up from 5.0% to 5.1%.”
“Digging a little deeper into alternative measures the RBA looks at – the under-employment rate jumped in April, from 8.2% to 8.5% and together with the unemployment rate jump, this drove the underutilisation rate higher, from 13.3% to 13.7% in April.”
“Given the underutilisation rate was at 13.0% in February, the jump to 13.7% in April indicates a clear pick up in spare capacity, increasing the hurdle for the RBA to get wages and inflation to target.”
“Today’s data poses a risk of the Bank pulling the trigger before August, but our preference would be to fade a June cut priced at 60%. Easing in June would appear rushed, with the RBA likely wanting to see more data before acting. It would also run counter to the stance the Bank has adopted for so long – to be a source of financial stability.”