The unemployment rate rose 0.1 to 4.7%, that’s seasonally adjusted, so there’s 8,900 more people that are looking for a job. They’re out of work, and this is taking the total to 732,000. Employment also fell by 39,300 in the month of September. August was just under 30,000 (29,300), but economists were expecting about 20,000.
That’s a five year high and above the 4.6% economists were thinking might have been the case. It’s the third monthly rise in a row, and this is one of the first signs that rate hikes are potentially slowing the economy. For context, that’s up from a recent low of 3.4%.
There’s something worth mentioning though. On the ABS’s preferred trend measure, unemployment held at 4.6%, and one bad month isn’t a collapse. Locally, looking at Hobart and Southern Tasmania, job ads were down 6.6% over the year.
After the jobs data, market odds of a November hike fell below 20%. Governor Bullock has said unemployment between 4.5% and 5% would probably take some heat out of the labour market, potentially enough heat, and 4.7% sits inside that range. If we’re going to speak in plain English, the RBA has been raising rates to cool the economy, and rising unemployment shows that that’s potentially starting to happen.
Andrew Hauser said the inflation outlook is materially worse than the RBA forecast, which puts a hike back on the cards for the November meeting. He reckons the jobs numbers might be noise, and that the economy needs to ease whether unemployment ends up at 5% or another figure. He reckons unemployment is still fairly low by international and historical standards, but market odds of a 3 November hike jumped to 55%, up from 24% the day before.
So inflation is the RBA’s main concern. A weaker jobs market alone, that’s not going to stop them. The September minutes reckon getting inflation down may mean accepting slower growth in demand and jobs, which suggests they’ll tolerate higher unemployment.
Commonwealth is expecting a hold at 4.6%, but does reckon there is a risk of rates increasing and that’s building. NAB reckons rates will stay on hold, but the risk still, you know, potentially is a hike. ANZ is expecting a November rise, though it reckons rising unemployment makes another increase this year less likely. So they’re saying one more in November, maybe not after that. Westpac is expecting a hike.
The quarterly inflation, also known as the Consumer Price Index or CPI figures, are landing next week, only days before the meeting. Only a hot inflation number is likely to put a November hike back on the table. The decision is on Tuesday the 3rd of November, which is incidentally Melbourne Cup Day, so that could put a dampener on people’s celebrations.
Markets are putting the chance of at least one more hike by the end of the year at around 90%. So the markets have pretty well factored in the rate rise, despite the big four banks being 50-50.
Another 0.25% rise on a half a million dollar loan, that’s roughly $81 a month on top of the four rises already this year. The unemployment side matters too. If job security is shakier, it’s worth having a buffer and making sure your loan still suits you.
Most importantly, don’t try to guess the RBA. This never works. It hasn’t worked historically and it’s ended pretty badly. Make sure you’re not paying a loyalty tax, check your rate, use your offset and check in with us at Fortify Loans for a free home loan review. We can look at your rate, we can make sure you’re getting a good deal.
Pre-approvals, this could affect your borrowing capacity. As rates rise, repayments rise, and borrowing capacity drops. So it’s important to check in if you have a pre-approval or if you’re thinking about getting pre-approved soon.
So I’d recommend booking a chat before Melbourne Cup Day, so we can have some good news prior to some potential bad news.
