Author: Chiu Stella
SYDNEY (Reuters) - Australia hired more people at a faster pace than expected in December, even as the unemployment rate rose as more people looked for work - a combination of trends that point to a healthy labor market, leaving the door open for a near-term interest rate cut. left room.
Figures released by the Australian Bureau of Statistics on Thursday showed net employment rose by 56,300 in December from a downwardly revised 28,200 in November, driven by an increase in part-time jobs.
December's gain was well above market expectations for a 15,000-point gain.
Annual job growth accelerated to 3.1%, more than double the historical average. The labor force is growing at a similar rate.
The unemployment rate rose to 4.0% from 3.9%, in line with expectations, while the participation rate rose to a record high of 67.1% from 67.0%.
AMP chief economist Shane Oliver said: "Overall it's been quite disjointed but you would think the labor market is still quite strong... it still leaves the underlying message that the labor market is still quite tight."
Slower wage growth also suggests the labor market is not the source of inflationary pressures.
"This puts the Reserve Bank in a difficult position... I think ultimately the February rate decision will depend on the December quarter inflation data being released," Oliver said.
The Reserve Bank of Australia expects underlying inflation to be 0.7% in the fourth quarter. Oliver said anything below that would make it difficult for the RBA not to cut interest rates next month.
The market's reaction to the employment data was muted. The Australian dollar rose 0.1% to $0.6230. Three-year bond futures pared earlier gains but were still up 8 basis points at 96.06 on tepid UK and US inflation data overnight.
Swaps still mean there is a 68% chance the RBA will cut interest rates on February 18 following the quarterly inflation report and another retail sales data, with sales expected to fall back in December after a strong performance last month .
The Reserve Bank of Australia has kept policy stable for a year, believing that the current cash rate of 4.35% (from 0.1% during the epidemic) is restrictive enough to allow inflation to reach the target range of 2-3% while maintaining employment growth.
The central bank unexpectedly turned dovish last month as economic growth continued to weaken. Even with government tax cuts, the pickup in consumer spending has been disappointing.
Data on Thursday showed part-time jobs rose by 80,000 in December, while hours worked rose a solid 0.5%.
"We see no evidence of labor market weakness and the labor market alone does not warrant a reduction in the RBA's policy rate in the near term," Citi economist Faraz Saeed said.
"We maintain the timing of the first rate cut in May 2025, but note the risk that falling CPI could allow the RBA to cut rates earlier."
(Reporting by Stella Qiu and Wayne Cole; Editing by Himani Sarkar and Edwina Gibbs)