Aussie Labour Force Preview

Clear as mud

We don’t normally preview Australia’s monthly labour force release because it’s known as the monthly “lottery” for a reason. It’s a household survey with relatively large standard errors.

But the December labour force release tomorrow is likely to attract even more attention than usual.

Labour market developments are a key input into the RBA Board’s deliberations, with markets pricing more than a 70% chance of a 25bp cash rate cut on 18 February.

The relatively sharp fall in the unemployment rate in November to 3.9% was a surprise. Many expect at least partial retracement of that decline in December. In that vein we address the impact of the “unemployed future starter” effect called out by the ABS a month ago.

Further muddying the picture is that we are now in the period in which labour force data have been volatile in the past few years.

Non-ABS measures of labour market tightness are currently even more important than usual.