Aussie Employment Surprises Markets

• Australia’s unemployment rate ticked up to 4.5%, underpinned by a stronger lift in labour force participation. In unrounded terms, the rate moved from 4.26% to 4.46%.
• Annual jobs growth has eased to around 1.5%, pointing to a slowdown in hiring momentum, particularly across sectors that had been strong earlier in the year such as health and social services.
• Bond markets reacted swiftly, with 3-year yields dropping about 13bp on the release before settling in a narrow range between 3.37% and 3.43%, while 10-year yields held steady near 4.15% to 4.21%.
• The softer labour data reinforces the growing market view that the RBA could deliver a rate cut as early as November, with the October 29 Q3 CPI release now set to be the key test.
• Markets currently price around a 77% chance of a November move (up from 35% before the data) and roughly 46bps of easing over the year ahead.