Australia's labor market delivered a significant negative surprise in April, with total employment falling by 18,600 month-on-month to 14,737,400, sharply missing forecasts for a gain of around 15,000 and reversing March’s upwardly revised rise of 23,300 [1]. The unemployment rate rose by 0.2 percentage points to 4.5%, the highest since November 2021, against expectations for a steady 4.3% [1]. Full-time employment declined by 10,700 to 10,160,900, while part-time employment fell by 7,900 to 4,576,500 [1]. The participation rate eased by 0.1 percentage points to 66.7%, though hours worked increased by 0.8% month-on-month [1].
The disappointing jobs data, combined with flash May PMI figures showing services slipping into contraction at 47.7 and manufacturing cooling to 50.3, painted a picture of an economy losing momentum on multiple fronts [1]. In response, markets sharply reduced the implied probability of a June Reserve Bank of Australia (RBA) rate hike to 10% from 20%, and trimmed August pricing from 60% to 40% [1]. The report likely reflects early effects of the RBA’s three consecutive interest rate hikes this year, which have lifted the cash rate to 4.35% [1].
The Australian dollar saw an immediate, broad-based selloff following the data release, with AUD/USD plunging to a session low near -0.65% within minutes, while other AUD crosses bottomed in the -0.55% range before a choppy and uneven recovery began ahead of the European session open [1]. AUD/JPY, AUD/CHF, and AUD/GBP remained the weakest, still down around 0.38% to 0.45% after the London open [1].
Looking ahead, the June RBA meeting is seen as a key test for the Australian dollar, with the case for a pause in rate hikes now substantially strengthened by the weak jobs data, though inflation remains above target at 4.6% as of March [1]. The outlook beyond June is uncertain, with attention shifting to whether the recent PMI weakness signals a broader economic slowdown or if persistent inflation, partly driven by global energy shocks, will force the central bank’s hand [1].
CONCLUSION
The sharp miss in Australia’s April jobs data and weak PMI readings have significantly reduced market expectations for near-term RBA rate hikes, triggering a broad selloff in the Australian dollar. While the case for a pause at the June RBA meeting has strengthened, persistent inflation keeps the policy outlook uncertain.