Unemployment rate holds steady, US Federal Reserve cuts interest rates by 50bp, ASX200 closes higher: As it happened

Capital Economics’ head of Asia Pacific, Marcel Thieliant, thinks the unemployment rate will continue ticking higher in coming months, but it’s unlikely the Reserve Bank will cut rates later this year.

“The labour market and population data released today are consistent with our view that the Reserve Bank of Australia will only lower interest rates in Q2 2025,” he said in a research note.

“For a start, the 47,500 rise in employment in August was nearly double the analyst consensus of 25,000 and meant that employment has risen by a strong 2.7 per cent over the past year.

“That marks an acceleration from a downward-revised 2.4 per cent increase in June and leaves employment growth on track to overshoot the RBA’s year-end forecast of 1.9 per cent.

“To be sure, the participation rate remained unchanged at its record high of 67.1 per cent, and with the working-age population still growing rapidly, that resulted in a large 37,000 rise in the labour force.”

Accordingly, the unemployment rate held steady at 4.2 per cent.

“That leaves it only a touch below the RBA’s year-end forecast of 4.3 per cent and with job vacancies still trending down, we still expect the unemployment rate to overshoot the RBA’s forecasts next year,” Thieliant said.

The latest population data also add to the case for keeping monetary policy tighter for longer.

“As things stand, population growth is more likely than not to overshoot the RBA’s mid-2025 forecast of 1.5 per cent, too,” he said.

“The bank has not made a clear judgment about the net impact of stronger population growth.

“All else equal, stronger population growth means higher growth in potential output, which in turn means that excess capacity should be eroded more quickly given the current weakness in actual GDP growth.

“But with most new migrants able to find jobs, it’s also boosting demand, including through its effects on house prices and household wealth. Our analysis shows that the recent strength in net migration has on balance been inflationary.”