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Jobless rate lower than expected, AUD falls anyway

Sean MacLean
Research Strategist
May 14, 2020
The April unemployment rate for Australia printed at 6.2%, well below expectations of 8.2%.

The AUD initially moved higher on the release but quickly forged a path lower, as the underlying data revealed even more job losses than expected.

Job losses were expected to total 575k and the unemployment rate 8.2%, assuming a constant participation rate. The employment change in fact exceeded expectations by 20,000, printing at -594.3k.

A falling participation rate drove the lower-than-expected unemployment rate. The participation rate was expected to fall modestly from 66% to 65.3%, but with an unexpected 500,000 people exiting the labour force, the participation rate printed much lower at 63.5%.

The biggest hit was to part-time jobs, which fell 374k compared to a 220k fall in full-time jobs. Hours worked fell 9.2% MoM and 8% YoY, reflecting the increase in underemployment to 13.7% from 8.8% in March.

AUD, ASX reaction

The Australian dollar initially moved higher on the release but quickly forged a path lower. Price found immediate support at the 20-day EMA (blue line) at 0.64225.

If the European and US sessions overnight don’t like what they see either and take the Aussie lower again, watch support there at 0.6380. This could shape up as a nice floor for the AUD to bounce back from. On the other hand, a daily close below could indicate a move lower from the double top pattern.

The AUD is far more sensitive to current global risk appetite than domestic data. The sell-off this week represents global risk aversion on increasing talks about negative interest rates, tensions between China and the US-led west, and fears of a second wave of COVID-19 cases if global lockdowns are lifted too early.

The ASX (AUS200) initially fell 26 points but quickly bounced back over the following hour.

The Reserve Bank of Australia (RBA) expects unemployment to reach 10% by the end of June. The JobKeeper scheme should keep a lid on unemployment over the next few months, with potential for a spike higher in September when the fiscal support is scheduled to dry up.

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