Labour Data Leaves RBA Focus on Inflation

• The RBA’s stance remains driven more by sticky inflation and firm activity data than by labour metrics. Conditions have softened modestly, but the Bank still sees the labour market as somewhat tight, with no clear signs of renewed wage-pressure emerging.
• Australia’s unemployment rate held at 4.3% in November, defying expectations for a small rise to 4.4% and marking a second month of stability in headline labour conditions.
• The detail was softer, with employment dropping by 21,300, against forecasts for a solid increase. This follows a downward revision to October’s earlier strong result.
• Measures of spare capacity widened underemployment lifted to 6.2% and participation slipped to 66.7%, now at an eight-month low and below the market’s 67.0% expectation.
• For markets, the release does little to shift the RBA outlook, with the data broadly in line with the Bank’s recent messaging. The next major test will be the quarterly inflation read at the end of January.