Australia's unemployment rate rose to 4.5% in April, the highest in about four and a half years, as the number of employed people unexpectedly fell by 18,600. The increase from 4.3% in March marks the first decline in employment this year, according to the Australian Bureau of Statistics.
The surprise rise gives the Reserve Bank of Australia more reason to delay another interest rate hike at its June meeting. Financial markets have slashed the probability of a rate increase on 7 June to just 3%, down from 13% before the data release. The chance of a hike by 12 August also fell to 40% from over 70%.
David Bassanese, chief economist at Betashares, said there were 'tentative signs suggesting the labour market is buckling'. However, he noted that whether the RBA raises rates again depends on inflation outcomes and whether the weakness in April was a one-off or part of a softening trend.
Taylor Nugent, a senior economist at NAB, said he still anticipates another rate hike but the timing has been pushed back from June to August. 'There is now less urgency for the RBA board to lean more firmly against inflation risks,' he said.
The jobless rate remains below pre-pandemic levels of over 5%, but has been drifting higher since a near 50-year low of 3.4% in late 2022. Last week's budget forecast unemployment would peak at 4.5% by mid-year, but warned it could reach 5% if a more severe Middle East crisis pushes oil prices towards $US200 a barrel.
The Australian share market extended gains on the data, with the S&P/ASX 200 index ending 1.5% higher, its best session in six weeks, as investors factored in a lower chance of future rate hikes.
