By Stella Qiu
SYDNEY, May 21 (Reuters) – Australian employment unexpectedly fell in April while the jobless rate jumped to the highest level since late 2021, a possible sign the labour market might be loosening enough to stave off a near-term interest rate hike.
The underwhelming data led markets to pare the chance for a rate hike in June to just 8%, from 20% before, following three consecutive rate increases by the central bank this year. A move in August is now seen as 33%, with just 22 basis points of tightening priced for this year, less than one rate hike.
The Australian dollar slipped 0.5% to $0.7120, while three-year government bond yields slumped 17 basis points to 4.568%, extending earlier declines.
“Today’s jump in unemployment signals that the labour market narrative may be shifting faster than expected. It validates the RBA’s inclination to hold in June and raises the bar significantly for a change,” said Krishna Bhimavarapu, economist at State Street Investment Management.
Figures from the Australian Bureau of Statistics showed net employment fell 18,600 in April from March, when it rose a revised 23,300. That was far below market forecasts of a 15,000 gain. Full-time jobs dropped 10,700 after a sharp rise the previous month.
The jobless rate climbed to 4.5%, the highest since November 2021, when analysts had looked for a steady 4.3%. The participation rate eased a tick to 66.7%. Hours worked still rose a solid 0.8%.
The ABS noted that a drop in female employment – the first since August 2025 – drove the overall fall.
HIGHER RATES, WAR UNCERTAINTIES
The RBA has raised interest rates three times this year to 4.35% to head off a war-driven global energy shock, fully reversing the amount of policy easing made last year. Annual inflation jumped to 4.6% in March, way above the target band of 2%-3%.
Despite April’s disappointing figures, the labour market has generally remained resilient and past sharp increases in the unemployment rate have been revised away. The RBA has judged some additional loosening would be needed to counter inflation, predicting the jobless rate may rise to 4.7% by mid-2028.
An ANZ survey showed Australian job ads fell 0.8% in April in the second straight month of declines, while a business survey from the National Australia Bank showed its employment index fell sharply in April.
Harry McAuley, an economist for Oxford Economics Australia, said the data more likely reflected pre-war economic sentiment, given firms’ hiring decisions tend to lag economic shocks.
“We expect the unemployment rate to peak at 4.8% in late 2027… Business confidence has cratered under higher inputs and borrowing costs, which will flow through their hiring decisions.”
(Reporting by Stella Qiu and Wayne Cole; Editing by Himani Sarkar and Sonali Paul)
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