Australia’s Unemployment Rate Drops to 3.9%, Complicating Prospects for Interest Rate Cuts

The unexpected decline in unemployment challenges expectations for a February rate cut as the Reserve Bank weighs inflation and labor market resilience.

• Australia's unemployment rate fell to 3.9% in November, defying forecasts of a rise to 4.2%, with 35,600 new jobs created, including 52,600 full-time positions.
• The Reserve Bank of Australia (RBA) had anticipated unemployment to reach 4.3% by year-end, raising questions about its assumptions on labor market slack and inflation control.
• Economists suggest the strong labor market reduces the likelihood of a February interest rate cut, with some expecting the RBA to delay easing until May or later.
• Key upcoming data, including inflation figures due in late January, will be critical in shaping the RBA's decision on monetary policy in early 2025.
• The robust employment figures have strengthened the Australian dollar and impacted stock markets, reflecting investor concerns over delayed rate cuts.

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