Australia's Jobless Rate Dips
Australia's Unemployment Rate Falls to 4.4% in May Amidst Easing Job Backlogs
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Key Points
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AUD/JPY slipped after Australia’s employment data, trading just below the 111.00 level and facing potential extension of the slide from the 115.00 area, which had been a key resistance/highs set earlier this month.
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May employment rose 40.3k in Australia, beating forecasts for around 25k and reinforcing a revision that saw the previous month’s reading cut to a 40.7k loss, highlighting a backlog easing rather than a straightforward tightening.
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Bank of Japan policy discussion intensified, with April meeting minutes showing some board members urged faster rate hikes to avoid inflation overshoot, and a June Summary of Opinions indicating debates on mounting inflation risks and quicker increases.
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There was currency-intervention rhetoric in play, as Japan and the United States signaled willingness to intervene if needed; officials including Japan’s Finance Minister and the U.S. Treasury Secretary discussed taking steps on currencies, while a note suggested action could be swift if warranted.
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Inflation backdrop remained mixed: May saw underlying inflation still strengthening, fuel prices easing headlining energy-driven moves; analysts noted the three-month trimmed mean around 0.8%, with RBA forecasts suggesting unemployment could drift higher and that 4.2% in the June quarter is the projection, while some warned 4.6% would bolster a ‘tightening done’ scenario and 4.4% could keep doors open to further hikes.
Australia's unemployment rate fell to 4.4% in May, dropping from 4.5% in April as the economy added 40,300 jobs — beating forecasts of around 25,000. Daily Mail Australia reported the result as a surprise rebound after a rough patch that included a heavy downward revision to April's figures.
The Australian Bureau of Statistics attributed the bounce to a technical backlog clearing. ABS head of labour statistics Sean Crick said "the backlog of people waiting to start a job has eased in May," moving workers from unemployed to employed status. The data lands at a sensitive moment, with the Reserve Bank of Australia watching closely for signs of whether more rate hikes are needed.
April's Ugly Revision Makes May Look Stronger
April's jobs data was already bad — but it got worse. The ABS revised April's reading from a loss of roughly 19,000 jobs to a loss of 40,700. ActionForex noted that swing makes May's 40,300 gain look bigger in contrast. In reality, the two months roughly cancel each other out, suggesting the market is rebalancing rather than surging.
The job mix also tells a cautious story. Full-time employment rose by just 5,000, while part-time jobs drove the bulk of gains at 35,000, according to Grafa. Monthly hours worked actually fell 1.1%. The underemployment rate ticked up 0.1 percentage point to 5.9%. Economists at William Buck warn this pattern — more workers, fewer hours — is "a classic precursor to a broader economic slowdown."
RBA Rate Hike Odds Rise After Surprise Drop
The 4.4% unemployment rate is exactly where the RBA projected it would be for the June quarter. That precision matters. It weakens the argument that tightening is done. Markets are now pricing a 23% chance of a rate hike to 4.6% at the August meeting, according to ChannelNews.
Analysts say the threshold matters a lot. If unemployment drifts to 4.6%, that likely signals the RBA is finished hiking. But at 4.4%, the door stays open. Australia's headline inflation sits at 4.0%, with the trimmed mean — a measure that strips out big price swings — at 3.6%, according to research cited by Mitrade. That keeps the RBA on guard.
Yen Intervention Threat Drags AUD/JPY Lower
The Australian dollar slipped after the jobs data, but currency moves were driven as much by Japan as by Australia. FXStreet reported AUD/JPY slid toward the 111.00 level, retreating sharply from a high of around 115.00 set earlier in June. The Yen firmed on rising fears of a coordinated US-Japan currency intervention.
Japan's Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent held an urgent meeting, with Katayama saying they "firmly agreed to take resolute measures, if necessary." MUFG analysts warned that if a joint intervention happens, AUD/JPY could fall rapidly below 110.00. The Bank of Japan is also debating faster rate hikes, adding more upward pressure on the Yen.
Labour Market Resilient but Showing Early Cracks
The participation rate held at 66.7%, a sign people are still looking for work. Investing.com described the May result as an "unexpected" rebound that shows the labour market is still alive. Retailers see a 4.4% unemployment rate as a confidence boost for household spending on big-ticket items.
But the optimism has limits. The massive April revision, the shift toward part-time work, and falling hours worked all point to an economy under strain. William Buck economists say the labour market is a "lagging indicator" — meaning the worst effects of high interest rates may not show up in the data for months yet. Most analysts expect unemployment to drift higher toward 4.6% over the coming year.
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