Australia’s unemployment rate remained at a historically low 4.1% in October, defying expectations of significant easing amid signs of slowing employment growth. This marks the seventh consecutive month at this rate, reflecting a tight labour market despite economic headwinds.

Data from the Australian Bureau of Statistics (ABS) revealed that net employment rose by 15,900 in October, a sharp slowdown from September's revised gain of 61,300 jobs. While below market forecasts of 25,000, annual employment growth remained robust at 2.7%, driven primarily by full-time roles.

The labour force participation rate edged down slightly to 67.1%, just below its record high of 67.2%, while hours worked rose by 0.1%, extending gains for a fifth consecutive month. The underemployment rate also saw a minor improvement, easing to 6.2%.

Economists noted that these figures underscore the resilience of the labour market, with strong underlying trends despite the slower headline growth. "This data highlights a firm labour market that remains tight," said Su-Lin Ong, Chief Economist at RBC Capital Markets. "The Reserve Bank of Australia (RBA) will likely need to see more loosening before considering rate cuts."

The strength of the job market has caused National Australia Bank (NAB) to revise its outlook on interest rate cuts. The bank now predicts the RBA’s first rate cut will come in May 2025, instead of February, citing the labour market’s sustained momentum and limited evidence of inflation cooling sustainably.

The RBA has kept its cash rate steady at 4.35% since late 2023, following a rapid tightening cycle that lifted rates from 0.1% during the pandemic. The central bank maintains its stance that current rates are restrictive enough to guide inflation back to its 2–3% target range while safeguarding employment gains.

Headline inflation slowed to 2.8% in the third quarter, primarily due to government electricity rebates, but core inflation remained elevated at 3.5%. The RBA has indicated that monetary policy will stay restrictive until inflation shows consistent signs of cooling.

Market reactions to the labour data were subdued, with the Australian dollar holding steady at $0.6485 and three-year bond futures unchanged at 95.78. Traders largely expect the first rate cut to occur in mid-2025, with only a slim chance of a move as early as February.

The resilience of Australia’s labour market supports broader economic stability but complicates efforts to ease monetary policy. The combination of tight labour conditions and lingering inflation pressures suggests little urgency for the RBA to adjust its current stance.

“This jobs report reaffirms the strength of Australia’s labour market, even with some slowing,” added Ong. “While it falls short of expectations, it doesn’t significantly alter the narrative of a tight and resilient employment landscape.”

The ABS data, coupled with the RBA’s cautious outlook, highlights the balancing act between sustaining job growth and controlling inflation. For now, Australia’s economy continues to navigate this tightrope, with the labour market proving a cornerstone of resilience.