The ASX hit a fresh record high today with the benchmark ASX200 reaching 8,200 points before closing slightly below that level at 8,194.6. The Materials sector was the best performer of the day as BHP (ASX:BHP) gained 2.68% to $40.24 per share, Rio Tinto (ASX:RIO) lifted 3.43% to $113.50 and James Hardie Industries ended 5.44% higher.
Following last night’s decision by the US Federal Reserve Board to cut interest rates for the first time in four years, the local news of the day came from the ABS who revealed that the jobless rate held steady at 4.2% in August.
During the month, the Australian economy added more jobs than anticipated, with a net 47,500 positions created. This figure exceeded the 26,000 jobs predicted by economists, driven primarily by part-time work, which saw a gain of over 50,000 roles, while 3,100 full-time jobs were shed.
Treasurer Jim Chalmers welcomed the continued job creation, acknowledging that the economy remains under pressure.
The RBA, which has raised interest rates 13 times to combat inflation, is expected to hold rates steady at its upcoming board meeting. However, financial markets are predicting a potential rate cut in February 2024, pending signs of inflation easing.
KPMG’s chief economist, Brendan Rynne, expects inflation to fall further but predicts rate cuts will not begin until early next year when inflation is within the RBA's target range.
“Next week’s monthly CPI data should show inflation falling, but it is still KPMG’s expectation that the RBA won’t start to cut the cash rate until early next year, when inflation is expected to be safely within the [2%-3%] target band,” Rynne said.
The release of the jobs data had little impact on the Australian dollar and the ASX200 index.
Job creation to ease
Moody’s Analytics economist Harry Murphy Cruise provided the following take on the jobs data:
“Across this year, monthly new job growth has averaged almost 39,000; in the last three months, that’s picked up to close to 48,000. At the same time, the participation rate, a useful indicator of potential workers’ perception of labour market strength, has stayed put at a record high of 67.1%.
“Leading indicators for the labour market back up August’s rosy picture. According to Jobs and Skills Australia, the number of newly advertised jobs jumped 4.8% m/m. This was the largest month-on-month gain since late 2021.
“At the same time, the volume of job ads on the online job website Seek jumped 0.3% m/m. Meanwhile, survey measures of hiring intentions through August showed a modest lift in firms looking to expand their workforce over the next three months, while the share of firms looking to decrease headcount has remained relatively stable.
“New job creation will ease through the rest of the year, dropping below the pace of new entrants to the labour market. In turn, unemployment is set to edge up to around 4.4% by December and 4.5% by mid-2025.
“To be clear, the labour market will not buckle, but its softening will chip away at households’ longstanding shield to the barrage of higher inflation and interest rates. Young Aussies and new migrants will feel the brunt of that the most.”
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