Market Focus for 11 FEB 2010


Australian Employment Change and Unemployment Rate (January)

Jobs growth may have eased; Unemployment rate to tick higher

RBA surprise decision to keep rates on hold highlights cloudier outlook moving forward

Downside risks to job data to come from drop in business confidence and spending; tied to consumer confidence following rate hikes in 2009


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The Australian employment data to be released on Thursday is expected to show another growth in jobs for the fifth consecutive month and although economists have recently been underestimating the number of jobs added (last month saw an increase of 35,200 jobs against the consensus forecast of a rise of 10,000), the risk for January may be heavier on the downside; the first month of 2010 will start to see the effect the earlier interest rate hikes (from 3% to 3.75%) on business spending and consumer confidence and this may be reflected by businesses being less willing to hire aggressively. Indeed, the Reserve Bank of Australia’s decision not to increase rates by another 25 basis points on February 2 to 4% left analysts somewhat confused, given that the central bank remained upbeat in its statement and forecast more monetary tightening later this year (the anticipated peak of the unemployment rate was also lowered to 6.75% from an earlier estimate of 8.5%).

Data released this week showed a larger-than-expected decline in retail sales and also a drop in both the NAB business confidence and Westpac consumer confidence indices, along with the first fall in 8 months for the Department of Education, Employment and Workplace Relations (DEEWR) leading jobs index. This further increases the prospect of a slowing of jobs growth in January even if the Australian economy will recover at a faster pace than that of the U.S. or Europe.

Given that positive jobs growth is forecast along with a tick higher in the unemployment rate from 5.5% to 5.6%, the trading scenario for Thursday’s data appears to be less straightforward. We would take the bearish-bullish triggers for the data to significantly affect AUD/USD and AUD/JPY to be the zone of +5,000 to +20,000 jobs added, below 5,000 would show a sharp pullback in employment while above 20,000 signals that the Australian jobs industry remains healthy and resilient.


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