The aussie was hovering around a 10-day low of $0.7970 during early Asian hours when upbeat labor figures out of Australia for the month of August lifted the currency slightly above the $0.80 key-level. However, improving conditions in the labor environment are said to do little for interest rates to rise from record-low levels as price pressures remain subdued. According to the Australian Bureau of Statistics, the economy added 54,200 jobs in August instead of the 15,000 expected and almost twice the previous mark, posting an increase for 11 months in a row. Regarding full-time positions, those jumped by 40,100 after falling by 19,800 in July (downwardly revised from 20,300). Although 269,000 positions were created this year, the unemployment rate in August remained flat at 5.6% as the labor force also rose by a similar amount of 257,000. The participation rate picked up by 0.2 percentage points to a 5-year high of 65.3%, surprising analysts who anticipated the rate to stand flat at July’s mark of 65.1%.
Despite the labor market building momentum, recent figures showed that wage growth was stuck at a record-low level of 1.9% y/y in the second quarter. In the same timeframe, inflation dropped unexpectedly to 1.9% y/y, far below the RBA’s target range of 2-3%. A reasoning behind this could be that jobs are mostly rising in service sectors (which represent two-thirds of the labor market), where firms tend to pay less. Moreover, consumers are seeing their disposable incomes squeezed as they are struggling to repay their record level of mortgage debts. Therefore, a rate hike in October is unlikely to emerge given the weakness in prices and the record-high household debts even though the economy has been growing for 26 years without a recession. In the forex markets, the aussie partially reversed Wednesday’s losses, jumping by 0.56% to $0.8015 during the Asian trading hours. However, a stream of disappointing Chinese data published a few hours later weighed on the currency, driving it lower to $0.8005.
