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MNI BRIEF: RBA Hike In Play On November Jobs Surge

MNI (PERTH)
(MN) Perth

Stronger-than-expected November labour force data has underscored the tightness in Australia's job market and supports the case for a further 25bp hike at the Reserve Bank of Australia's February meeting

The addition of 64,000 jobs exceeded consensus expectations for 19,000 new jobs, with the unemployment rate remaining steady at a 48-year low of 3.4%. The seasonally-adjusted participation rate rebounded to its prior record high of 66.8%, according to ABS data published Thursday.

The RBA has expressed concerns that the tight labour market could lead to significant increases in wages, which could feed into a wages-prices spiral. Governor Philip Lowe said in late November that a return to its 2-3% inflation target "will be smoother if growth in labour costs doesn't accelerate much more." The Q3 Wage Price Index rose at a 3.1% y/y rate. (See MNI BRIEF: RBA's Lowe Flags Wages Risk In Inflation Fight)

However, there are signs the tightness in the jobs market may be peaking as growth cools under the weight of higher inflation and 300bp of rate hikes since May. Q3 job vacancies fell, though they remain at elevated levels. The RBA's November statement on Monetary Policy forecasts the unemployment rate will rise to 3.7% by the end of 2023.

Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
Robert covers RBA and RBNZ policy and the economy for MNI in Australia.

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