AUD holds steady as Australia's jobless rate hits 4.6%, participation surge offsets jobs beat

The subdued reaction in the Australian dollar to the data reflects a jobs report with mixed signals: headline hiring came in strong, but a higher unemployment rate and a decline in full-time roles soften the hawkish interpretation. Rate markets are expected to view the rise in joblessness as stemming from increased labour supply rather than weaker demand, keeping attention on inflation and the Reserve Bank of Australia's decision next week. The ASX 200's partial rebound indicates equity investors found some reassurance that the labour market is not deteriorating sharply. The Australian Bureau of Statistics' caution about seasonal adjustment may lead traders to rely more on trend data, reducing the report's impact as a market mover.

Headline beat, but unemployment rises

Australia's jobs market added positions at double the forecast pace, yet unemployment still climbed because even more individuals entered the workforce, a nuance that does little to alter the RBA's focus on price pressures.

Key points:

• Employment rose by 39,500 in August, surpassing the 20,000 forecast, following a 15,800 decline in July
• Full-time employment dropped 6,300, while part-time roles increased by 45,800
• The jobless rate increased to 4.6% from 4.5%, exceeding predictions and reaching its highest since late 2021
• The participation rate rose to 67.1% from 66.9%, above the 66.9% estimate
• Hours worked gained 0.7%, underemployment fell to 6.2%, and monthly employment averaged 34,000 over three months
• The ABS noted a survey methodology change and urged caution with seasonally adjusted August data, recommending trend figures instead

Australian employment expanded much more than anticipated in August, reversing the previous month's surprise decline, but the unemployment rate still increased to its highest point since late 2021 as a wave of people entering the workforce outpaced hiring, according to Australian Bureau of Statistics data released on Thursday.

Jobs grew by 39,500 in August, roughly twice the 20,000 increase markets had expected, following a 15,800 drop in July. The breakdown was less positive, with full-time positions declining by 6,300 and part-time roles accounting for all the gain, rising 45,800. Over the latest three months, employment has increased by an average of 34,000 per month.

The jobless rate rose to 4.6% from 4.5%, where economists had predicted it would remain. The increase stemmed from a surge in the participation rate to 67.1% from 66.9%, as a greater proportion of Australians entered the labour force seeking work. The unrounded unemployment figure was around 4.65%, close to rounding up to 4.7%. Hours worked climbed 0.7% during the month, while underemployment declined to 6.2%, indicating the labour market still has some underlying strength despite the higher headline rate.

The outcome diverged from more optimistic forecasts. National Australia Bank had anticipated the jobless rate falling to 4.4%, arguing the decision was tight given July's rate had been just below 4.5% before rounding.

The ABS also highlighted a methodology change affecting the release. The bureau introduced a new collection model for its supplementary survey, intended to eliminate a distortion that had previously appeared in February and August labour force data. It noted that this distortion may have inadvertently captured some seasonal patterns, but said testing indicated any effect on monthly changes should be smaller than normal sampling noise and that the August figures are fit for purpose. The ABS advised users to keep the potential impact in mind when working with August's seasonally adjusted data and reiterated that trend figures remain the best measure of underlying labour market conditions.

Market response was muted. The Australian dollar traded little changed against the US dollar following the release, while the ASX 200 pared its losses but still ended lower for the day. With employment growth solid and the rise in unemployment driven by participation rather than job cuts, analysts view the data as unlikely to change the RBA's near-term outlook, with the case for a rate hike at next week's meeting still intact.