Data is here: Australia – employment data terrible – Australian dollar smashed lower
Westpac’s Sean Callow:
- This is an obvious sour note for the RBA’s increasingly positive outlook
- Policymakers can only hope that the improvement in confidence measures, housing etc will eventually translate into a pickup in job creation over the year ahead
- This is a nasty setback for what was an increasingly bullish AUD outlook but not a game changer
AUD/USD approached the data around 0.9025 and quickly sank as low as 0.8938. We would note that this still leaves the Aussie well above the 0.8760 pre-RBA statement levels from last week. Technical support lies in the 0.8900/25 area; our inclination is to buy dips in that region, with positive signs for AUD multi-day from an RBA stance that won’t change any time soon, a likely bounce in China’s data pulse and waning concerns over EM contagion.
HSBC chief economist Paul Bloxham:
- The job losses ‘‘surprised the market’’
- ‘Iit’s quite clear that the labour market remains weak and lags all the other indicators in the economy’’ (for example the pick up in the housing market)
- He expects employment to improve in the months ahead
- But won’t necessarily strengthen the AUD: -says it will fall to around the mid 80s by mid-2014 due to the strengthening greenback.
Moody’s Analytics associate economist Katrina El:
- “There’s no spinning it, Australia’s labour market is weak”
- “Businesses are not confident in future economic conditions so are trimming jobs and working their existing staff harder”
St George’s chief economist Besa Deda:
- “I guess what we’ve got to remember is jobs growth is a lagging indicator of economic activity,”
- “In recent months, we have seen more encouraging signs in the economy, but that will take some time to feed through to the jobs numbers. Leading indicators are showing some stabilisation, which is encouraging. ….. we can expect the unemployment rate to edge higher through the first-half of this year.”
Citigroup:
- The RBA is factoring a rise in unemployment rate to 6.25%, so the rate would have to breach that level before it considers the possible need for further easing
ANZ:
- Data a surprise to them
- Still expect the employment outcome will gradually improve
- View remains the RBA will keep the cash rate unchanged this year and gradually tighten from early 2015
Crédit Agricole analyst Mitul Kotecha:
- the data “will clearly restrain AUD in the short term”
- Unlikely to spark the central bank into easing interest rates, because of inflation pressure
- “AUD is set to continue to show some resilience over coming weeks”
TD Securities’ Annette Beacher:
- “While this sticker-shock report will drive markets to again entertain another RBA rate cut, we remain of the view that this ‘weaker’ report and lift in the unemployment rate remains within the bounds of current RBA thinking”
Joseph Capurso, strategist at Commonwealth Bank of Australia:
- “The Australian labour market has been the weak spot in the economy in the past year and this has not changed today.. The Aussie is likely to continue drifting lower today.”
Shane Oliver, chief economist at AMP Capital Markets:
- “Certainly not good, another decline in jobs after a bigger fall in December, the jobs market is still very weak as a result”
- “My feeling is that as business gradually improves with profit results, the labour market should start to improve in the second half of the year”
UBS:
- “Such weakness makes it too early to dismiss entirely the chance of the RBA cutting further”
- But stronger other data recently, so the “balance of better data but a weak jobs market” supports view that the RBA is likely to remain on hold this year
JP Morgan:
- “The RBA already has a rear-guard defence for rising unemployment (it is their base-case), but continuation of this trend, amid further tightening in fiscal policy, will be hard to ignore”
