Contained After Labour Market Data

A contained and modest uptick for futures in the wake of the miss in the headline employment number provided in April’s labour market report, although the downside disappointment was solely driven by a fall in part-time employment. The continued move lower in underutilisation and underemployment bodes well for remuneration, with the RBA’s liaison programme already revealing more notable upward wage pressures than that observed in the lagged WPI data (which is also hindered by its construction when it comes to tracking non-standard remuneration measures). We would argue that yesterday’s WPI reading probably takes any need for a larger than expected 25bp hike off of the table when it comes to the Bank’s June meeting, unless RBA liaison digs up a more timely and meaningful surge in pay awards or it really wants to get back to the traditional 25bp multiples for the headline cash rate target level. Wider risk-off price action observed since yesterday’s close saw IB strip pricing re: the RBA’s June meeting narrow a touch, to price in ~32bp of tightening vs. ~34bp of tightening at the Sydney close (per BBG’s WIRP function), with that metric virtually unchanged over the labour market data release. YM benefits more than XM post-data although both stick to their early Sydney ranges, with the former +8.5 and the latter +10.0 on the day.