The Australian labour market demonstrated unexpected resilience in November, with the unemployment rate slipping to 3.9%, down from 4.1% in October, contrary to economists' predictions. Employment rose by 35,600, driven entirely by full-time roles, while part-time positions declined by 17,000.

The Australian dollar gained strength, and the yield on three-year policy-sensitive notes climbed following the release of the data. Traders have since pared back expectations of a February rate cut, with meeting-linked swaps data compiled by Bloomberg indicating the chance of a cut fell to a coin toss from over 70% before the jobs report.

Reserve Bank Governor Michele Bullock's dovish tilt earlier in the week, citing weaker economic momentum and easing price pressures, may now face reassessment. "The RBA's dovish leanings in the December policy statement will need to be reassessed," said Faraz Syed, an economist at Citigroup Inc. He added, "We stick with the first cut occurring in May but reiterate the risk that the first easing does not occur until August 2025."

Meanwhile, Nomura's senior rates strategist Andrew Ticehurst suggested that low inflation could still allow for a rate cut. "Even if today's unemployment rate does not suggest we require one, weaker economic and wage growth alongside slowing inflation could justify policy easing," he remarked.

The jobs report also revealed:

• Annual employment growth of 2.4%.

• A decline in the participation rate to 67% from 67.1% in September.

• A reduction in underemployment to 6.1%, down from 6.2% in October.

• A surge of 52,600 full-time roles offsetting the loss of part-time positions.

Head of labour statistics at the Australian Bureau of Statistics David Taylor observed, "The recent growth in population has boosted the labour supply as employment has kept up with population growth."

The RBA now faces a complex balancing act, with market sentiment shifting away from a February cut even as broader economic signals suggest room for easing later in 2025.

Bloomberg