3 reasons why traders should be paying extra attention to Australia's jobs report

Glenn Koenig/Los Angeles Times via Getty ImagesIt’s a key piece in Australia’s interest rate debate.
  • Australia’s jobs report for June will be released later today.
  • Mizuho’s economics and strategy team says jobs figures have increased in significance when it comes to the outlook for RBA monetary policy settings, outlining three reasons why.
  • It says Australian financial markets could be particularly sensitive to weaker-than-expected outcomes.

Australia’s jobs report for June will be released later today.

Mizuho’s economics and strategy team will be paying closer attention than usual, suggesting Australia’s job market will probably be “punching above its weight as a determinant of RBA policy” in the months ahead.

“There are three reasons why Australia’s jobs data will demand attention in coming months as RBA remains firmly in ‘neutral’ mode,” the bank says.

“First, inflation continues to be benign, removing the natural trigger for rate normalisation. Instead, the inflection for policy is now more inclined to hinge on stronger all-around jobs data insofar that it lowers resistance to tightening.

“Second, a sharp deceleration in full-time jobs creation is a bugbear, and one which is likely to hold back the RBA hawks-in-waiting.

“Finally, despite the healthy run of jobs through 2017, lagging, and in fact subpar, wage growth is another concern for the RBA, especially in the context of significantly more indebted households.”

Mizuho says signs of sustained growth in both jobs and wages will be watched for, and desired, before the RBA turns hawkish, setting the scene for an eventual normalisation in policy settings.

As such, it says the RBA will place significant policy weight on how the labour market evolves from here, and potentially lead to larger-than-usual volatility in Australian financial markets surrounding upcoming jobs reports, especially should the data undershoot the RBA’s optimistic expectations.

“[There] could be more volatility in the Australian dollar around jobs data given the RBA’s focus,” it says.

“For now, the AUD could be more sensitive to downside risk in jobs.”

Australia’s June jobs report will be released at 11.30am AEST. The median economist forecast looks for an increase in employment of 16,500, leaving the unemployment rate steady at 5.4%.

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