Australian employment figures for August fell by 10.8K, much lower than market estimates for a rise of 10K as weaker demand discouraged hiring. The unemployment rate rose to +5.8% which was in line with forecasts though the participation rate was lower. Full time employment fell less than the prior period while part time fell more than the July number.
The Aussie, which was trading around the 0.9345 key resistance level and looked ready to explode higher, fell sharply and immediately to 0.9300 and is currently trading around the 0.9270 region.(click chart to enlarge) This report complicates the task for the new coalition government which came to power by pledging to lower taxes and cut red tape as they attempt to boost the economy. The RBA had cut rates by 225 bp since 2011 based on their forecasts of a softer labor market and below-trend growth. The tide seemed to be turning as recent economic data, while not overwhelmingly positive, had been showing signs of stabilization which had the market reducing the odds of further rate cuts this year. This report has to give traders cause for pause as they will be forced to re-examine the possibility of further easing by the RBA.