Jobless rates falls to 6.1 per cent, reversing July jump to 6.4 per cent
The local dollar leaped and markets are virtually pricing out the chance of a rate cut as Thursday's data from the Australian Bureau of Statistics showed 121,000 jobs were created in August. That was the largest rise since the series began in 1978 and dwarfed expectations for a 12,000 increase.
The jobless rate also surprised by falling back to 6.1 per cent, so reversing most of July's unexpected jump to 6.4 per cent. Most of the gains came in part-time jobs which surged 106,700, while more people went looking for work as the participation rate jumped to a 16-month peak of 65.2 per cent.
Analysts cautioned the series was notoriously volatile and carried a lot of statistical noise, but even then the scale of the gains could not be ignored.
"It's really an off-the scale result to get more than 100,000 jobs created against expectations of only about 10-15,000, and is clearly a very big upside surprise," said Stephen Walters, chief economist at JPMorgan.
"It's always a bit difficult to track what's really going on in the labour market just looking at employment on its own, but when you look at the unemployment rate it's actually come all the way back down to 6.1 per cent which is where we were a few months ago."
July's spike in unemployment to a 12-year peak of 6.4 per cent had caused a lot of hand-wringing at the time and much media talk of a sagging economy, and even recession.
Since then data has shown the economy grew a little faster than expected in the year to June at 3.1 per cent, while retail sales and home building has been running firm.
Catching up in a rush
Leading indicators of labour demand have also been pointing to a pick up, with ANZ's survey of job advertisements rising for a third straight month in August to be up almost eight per cent on the year.
"First impressions are that it's obviously providing a bit of catch up in employment after some very weak jobs growth in recent months," said Spiros Papadopoulos, a senior economist at National Australia Bank.
The ABS did note that the rotation of its survey group included an unusually large rise in part-time employed. Yet it also said that, because of the unusually strong increase in employment estimates, it had extensively checked the data.
Analysts emphasized that the Reserve Bank of Australia (RBA) was very well aware of the volatility in the data and would want to see a consistent run of better jobs numbers before concluding that the labor market had really turned the corner.
Just last week, RBA Governor Glenn Stevens said a sustainable fall in unemployment might not begin until late in 2015, suggesting a rise in interest rates was also a distant prospect.
The central bank has kept rates at record lows of 2.5 per cent for over a year in order to support domestic demand as a long boom in mining investment starts to wind down.
Even before Thursday's data, it had sounded content that rates had gone low enough, leading markets to price out much prospect of another easing. Interbank futures now put the chance of a cut at less than 10 per cent, down from 20 per cent before the data.