Australian Dollar Stumbles As Covid Sees 594,000 Jobs Lost In April
Australian Dollar, Official Labor Market Data, Talking Points:
- Australia lost 594,300 jobs in April
- This was even worse than expected
- The unemployment rate held up better, but is all but sure to rise further
The Australian Dollar had been prepared for one of the weakest employment data sets on record and slipped only modestly on confirmation of this.
Thanks to Covid the economy lost 594,300 jobs in April, worse than the 575,000 expected. Full time employment was down by 222,500 with 373,800 part-time roles lost. The only glimmer was in the unemployment rate. That was 6.2%, up from the 5.2% of March but below the 8.2% expected.
The labor market collapse had been expected as it was well-known in the market that the previous month’s data had been flattered to a great extent by a collation period which pre-dated various contagion-limiting shutdowns.
The Reserve Bank of Australia said this month that it expects unemployment to peak at around 10% this year, with growth set to fall by a similar amount. That suggests that a few more months of deeply unpleasant data are likely, which may account for the Aussie’s lurch lower after the data.
Australian interest rates are already at record lows, and may yet go lower. In any event no rise is likely for the foreseeable future.
As its daily chart shows the Australian Dollar has risen sharply against its big US cousin from the coronavirus-inspired lows of March. It gained alongside most other growth correlated assets as forthright efforts from monetary and fiscal authorities around the world reassured investors that plentiful credit would keep flowing through a financial system stricken by the contagion.
This bullishness has slowed somewhat in the past couple of weeks, however, as the financial world contemplates the certainty of deep global recession. That certainty is only underlined by dire jobless figures such as have been released on Thursday.
At present the RBA expects that the snap-back in growth and employment prospects will be quite swift, with 2020’s first half marking the low point. For now the markets are prepared to agree, if tentatively, but any signs that the reopening of economies brings with it significant ‘second wave’ infections may well see that thesis questioned, with renewed pressure then likely on the Australian Dollar and other assets with similar risk profiles.
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--- Written by David Cottle, DailyFX Research
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