ABS jobs data likely to keep interest rate on hold, for now

The RBA’s next move appears all but certain, but the latest jobless data shows how keeping a lid on both inflation and layoffs remains a delicate balancing act.

Reserve Bank governor Michele Bullock. Picture: NewsWire / Nikki Short

Unless we get a big - and nasty - surprise with the inflation numbers next Wednesday week, the latest jobless numbers will all-but certainly see the Reserve Bank leave its official interest rates unchanged yet again, at its meeting next Tuesday fortnight.

The jobless numbers were a tantalising mix of good and bad news.

As Bjorn Jarvis, the head of labour statistics at the ABS, captured it: jobs up around 50,000, but the jobless numbers also up, around 10,000.

The net result was the jobless rate edging up from 4.0 to 4.1 per cent. But a rate still well down on the level just before Covid.

As Jarvis characterised it - and I would suggest, so also would the RBA - the labour market remained “relatively tight”.

So, simply, we don’t have the rocketing unemployment that could force the RBA to consider a rate cut.

Yet, at the same time, we have other evidence, that the labour market is getting very close - if not indeed teetering right on the edge - of a real surge in the jobless rate.

Not the edging up to 4.1 per cent, but going to 4.5 per cent and heading for 5 per cent.

The Seek employment report, also out yesterday, for example, showed job ads down 1.5 per cent month-on-month and by a thumping 17.1 per cent over the year.

Plus, applications per jobs ad were up an even more stonking 61 per cent over the year.

Any serious breakout upwards in the official jobless number would instantly at least terminate any prospect of the RBA raising its rate.

Let’s not forget that right now - as of its June meeting - the RBA’s official position is an unchanged rate, but only after tossing up between that and a rate hike.

In its detailed minutes of the meeting, there was zero discussion of the case for a rate cut.

So, in the wake of the - tantalisingly ambiguous but still “relatively tight” - jobs market, the full quarterly inflation numbers become critical.

The last inflation print showed 3.6 per cent inflation over the year to the March quarter.

Although it kicked up to 1 per cent in the actual March quarter - or 4 per cent annualised - over the latest six months it still ran at a lower 3.2 per cent annualised.

In its latest forecasts, the RBA had inflation at 3.8 per cent for the June year. It will hit that figure if we get another 1 per cent inflation figure for the June quarter.

The RBA wouldn’t be over the moon if its prediction proved correct. But it could hardly hike in those circumstances, especially after these latest - mixed - jobs data.

If inflation printed much lower, a “surprise” rate cut would be “possible”. But it’s all-but impossible to see that happening.

If inflation came in at 1.2 per cent, or worse, even higher, a rate hike would become almost mandatory. Again, given these “relatively tight” jobs numbers.

A week ahead of our RBA decision, we get the even more important Fed decision.

More important, frankly, for the world; and even, ultimately, us.

Originally published as ABS jobs data likely to keep interest rate on hold, for now