Australia’s unemployment rate is expected to rise to 4.0% in December

• The Australian unemployment rate is expected to reach 4% in December.
• The change in employment is expected to include a significant increase in full-time positions.
• AUD/USD has corrected from multi-year lows, and sellers maintain control.

The Australian Bureau of Statistics (ABS) will release its monthly employment report for December at 00:30 GMT on Thursday. The country is expected to add 15,000 new jobs, while the unemployment rate is expected to rise from 3.9% recorded in November to 4.0%. The Australian Dollar (AUD) is trading at around 0.6200 against the US Dollar (USD), not far from a new multi-year low of 0.6130 hit in early January.

The ABS Employment Change Report separates full-time jobs from part-time jobs. By definition, full-time jobs mean working 38 hours or more per week and usually include fringe benefits, but mostly represent a fixed income. Part-time work, on the other hand, generally offers higher hourly rates but lacks consistency and benefits. This is why full-time jobs are given more weight than part-time jobs when determining the directional path of the Australian dollar.

In November, Australia created 35.6 thousand new jobs, added 52.6 thousand new full-time jobs and lost 17 thousand part-time jobs.

The Australian unemployment rate is expected to rise in December

The Australian unemployment rate was between 4% and 4.2% between April and September 2024, and the decline to 3.9% in November was a positive surprise. The 4% expected in December, although higher than previously, is not a level that could raise any concerns.

Meanwhile, the Reserve Bank of Australia (RBA) decided to leave its interest rate target unchanged at 4.35%. On the one hand, the Council welcomed that inflation “has fallen significantly since its peak in 2022”, with headline inflation standing at 2.8% over the year to the September quarter. However, core inflation reached 3.5% in the same period, “still far from the 2.5% midpoint of the inflation target.” The Reserve Bank of Australia maintained its inflation forecast, suggesting that price pressures will not fall significantly within the target range until 2026.

Regarding employment, policymakers noted that a range of indicators indicate that labor market conditions remain difficult. “The unemployment rate reached 4.1% in September, up from a low of 3.5% in late 2022. But the participation rate remains at record levels, job openings remain high, and average hours worked have stabilized. Meanwhile, some Cyclical labor market measures including youth unemployment and underemployment.

The monthly report does not include wage growth. These figures are released on a quarterly basis, and the latest showed the annual WPI at 3.5%, also above the desired midpoint of 2.5%.

Finally, it’s worth remembering that financial markets are looking elsewhere: US President-elect Donald Trump is scheduled to take office next Monday, and has pledged to impose massive tariffs. Risk aversion dominates financial councils amid fears that its policies will lead to higher inflationary pressures. As a result, the US dollar reached multi-month highs against most major currencies this week and market participants suspect that the US dollar’s rally is not over yet.

When will the Australian employment report be released and how could it affect AUD/USD?

The ABS is scheduled to publish its December employment report early Thursday. As previously mentioned, Australia is expected to add 15,000 new jobs during the month, while the unemployment rate is expected to reach 4.0%. Finally, the participation rate is expected to stabilize at 67%.

Overall, a better-than-expected employment report will boost the Australian dollar, even if the most significant increase comes from part-time jobs. However, progress can be more sustainable if the increase comes from full-time jobs. The opposite scenario is also true, with weak numbers weighing on the Australian currency. At this stage, the report has no chance of influencing the RBA’s next decision.

As mentioned earlier, the AUD/USD pair is trading around the 0.6200 level, which is not far from its almost four-year low of 0.6130. According to Valeria Bednarik, Senior Analyst at FXStreet, “The current advance of the AUD/USD pair looks corrective, given the extremely overbought conditions for the US dollar. The caution preceding the Trump government favors demand for safe-haven assets.”

“From a technical point of view, the AUD/USD pair may resume its decline soon,” Bednarek adds. “The daily chart shows that it is higher for the third day in a row, but is still below its moving averages. The 20 simple moving average provides a strong bearish (SMA) Near-term dynamic resistance at around 0.6220 Meanwhile, the 100 SMA is crossing below the 200 SMA, although both are developing above. 300 points above the current level, in line with the prevailing downward trend. Finally, the technical indicators corrected the extremely oversold conditions, but remained within negative levels.

“Critical resistance comes in at 0.6301, the January 1 high. Sellers are likely to reappear around it, if strong employment numbers push it higher. Immediate support is the January 14 low at 0.6160, followed by the mentioned low at 0.6130. A break below The latter reveals the psychological level of 0.6000.”