Jobs surge may pressure RBA to resume rate hike
The August jobs report, which beat expectations on all fronts, is raising speculations that the Reserve Bank of Australia may resume hiking interest rates soon.
The latest employment figures showed a near 31,000 jump in total employment and an over 53,000 surge in full-time employment, while the unemployment rate unexpectedly dipped to 5.1 per cent.
Many thought the combination of rising employment and falling unemployment could fuel price pressures and force the central bank to resume raising rates at its monthly policy meetings.
The Australian dollar, for instance, soared on Thursday because traders figure the data will add pressure on the RBA to lift the cash rate from 4.5 per cent as early as October. Prior to the release of job figures, market analysts had focused on a November or December rate rise.
''The data means that traders are pricing in a higher chance of a rate move by the RBA, potentially in October,'' CMC Markets foreign exchange dealer Tim Waterer said.
The data will heighten concerns that inflation will soon emerge as a problem for the RBA, especially if the unemployment rate heads below 5 per cent in coming months, which is likely to deliver a flash point for inflation in the last economic upswing.
Last Tuesday, the RBA left its cash rate on hold at 4.5 per cent for a fourth straight month, but suggested the next move would be upward when its said rates were appropriate only for "the time being".
The strong job market supports recent evidence that consumers are spending again after a lengthy period of caution.
Scott Haslem, chief economist for Australia at UBS said "This data reinforces our view that the RBA will be back in action before the end of the year."
He added that the RBA could hike rates as early as the October board meeting.