Continued Strength in the Labour Market

• The January labour force report showed the unemployment rate steady at 4.1%, firmer than the 4.2% expected and still the lowest level since May, reinforcing the view that the labour market remains tight.
• Total employment increased by 17,800 to 14.70 million, undershooting forecasts slightly but building on December’s revised 68,500 gain and leaving employment at a record high.
• The participation rate held at 66.7%, a touch below consensus, suggesting the steady unemployment print was not driven by a surge in labour supply.
• For the RBA, the data does little to ease concerns around persistent inflation pressures. With labour conditions still tight any signs of renewed strength would risk entrenching underlying price momentum rather than allowing it to fade.
• The market is pricing just above 20bps of cumulative hikes by the RBA’s May meeting, and roughly 40bps of tightening by the end of 2026.