Jobs data the latest clue on possible summer rates hike
New employment data may provide more clues about the possibility of the Federal Reserve raising interest rates in February.
The Australian Bureau of Statistics’ labor report on Thursday will be the first major economic indicator since RBA governor Michele Bullock shook markets by announcing the central bank would have to consider raising interest rates in 2026.
Speaking to the media after the RBA’s monetary policy board kept the cash rate at 3.6 per cent on Tuesday, Ms Bullock said the board would need to consider raising rates in February if inflation and employment data showed financial conditions were not tight enough.
“That’s what we’ll be focusing on; deciding whether we need to raise interest rates again or whether financial conditions are tight enough to maintain downward pressure,” he said.
Ms Bullock said the RBA still believed labor market conditions were somewhat tight, unemployment was at a relatively low level of 4.3 per cent and measures to address labor underutilization were subdued.
RBA staff predict the unemployment rate will rise to 4.4 per cent by the end of 2025 and remain at that level for two years.
The consensus among market economists is that unemployment will rise to 4.4 percent on Thursday.
Belinda Allen, CBA’s head of economics for Australia, thinks the rate will remain at 4.3 per cent with an additional 25,000 jobs added to the economy in November.
“The labor market still looks good using our data from the CBA, and we certainly expect that in tomorrow’s November data,” he said.
ANZ economist Aaron Luk also expects the unemployment rate to remain at 4.3 per cent as the decline in job postings continues, indicating a modest job gain of 15,000.
If the unemployment rate remains below the RBA’s forecasts, this will further increase the likelihood of a rate hike in February.
Before that, the ABS will publish another workforce update on January 22.
The biggest piece of the data puzzle will come on January 28, when inflation figures for the December quarter will be released.
“There are still some questions about whether inflation pressures are temporary or permanent. We should have more answers on this after the December quarter inflation report,” Ms Allen said.
“However, I think the stronger consumer environment, together with recovering business investment and still-robust public demand, means the economy is very close to, if not over, its capacity limits.
“That’s why you start to see more talk about inflation and higher interest rates from here on out.”
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