(Bloomberg) — Australian employment surprisingly dropped in February, sending the currency and government bond yields lower as traders boosted bets on further interest-rate cuts this year.
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Employment declined by 52,800 — led by full-time roles — compared with a forecast 30,000 increase, government data showed on Thursday. The jobless rate held at 4.1%, reflecting a fall in participation.
The currency slipped while the yield on policy-sensitive three-year bonds extended an earlier decline as traders increased wagers on a near-term rate cut and for the easing cycle to extend into 2026.
“The Aussie is losing a bit of ground on the headlines, but from a policy perspective the RBA is unlikely to be disturbed by the data,” said Rodrigo Catril, a strategist at National Australia Bank Ltd. He pointed out that the jobless rate remained at 4.1% and the central bank expects it to be 4.2% in June this year.
The result follows the RBA’s decision to cut the cash rate by a quarter percentage-point to 4.1% last month as it gains confidence that inflation is easing. At the same time, global markets have been roiled by a spate of tariff announcements and threats from the Trump administration that targeted US allies such as Europe and Canada and competitors like China.
What Bloomberg Economics Says…
“We see the job market weakening ahead. But until the deterioration starts to show clearly across all the gauges we think RBA will be reluctant to deliver swift reductions in the cash rate.”
— James McIntyre, economist
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Money markets are pricing a roughly 77% chance the RBA will ease in May, up from a coin toss prior to the release. Traders have also fully priced the RBA making two more cuts after that by the first quarter of 2026, up from a roughly 80% chance prior to the jobs report.
A weakening of the labor market comes at a difficult time for Prime Minister Anthony Albanese’s Labor government as it prepares for an election due by mid-May. The opposition Liberal-National coalition holds a slight edge in polls with the government having been blamed for rising living costs over the past couple of years due to high inflation and elevated borrowing costs.
“Today’s data shows some of the expected softening in the labor market,” Treasurer Jim Chalmers said. “While there are still challenges in our economy and people are still under pressure, we still have the lowest average unemployment of any government in the last 50 years.”
