ASX shares are broadly taking the latest Aussie unemployment data, released by the Australian Bureau of Statistics (ABS) at 11:30am AEST, in stride.
The All Ordinaries Index (ASX: XAO) was off to a strong start this morning, up 0.5% in early trade following the Fed's overnight 0.50% interest rate cut.
But, as with the volatility witnessed in US markets on that news, ASX shares had given back most of those gains, with the All Ords essentially flat, by the time the ABS released its labour data.
In the minutes following that release, the muted reaction of the ASX All Ords – slipping by 0.1% – indicates that markets have been pricing this one in correctly.
Here's what's happening.
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ASX shares edge lower as unemployment holds steady
ASX shares edged lower after the ABS reported that Australia's unemployment rate remained steady at 4.2% in August.
Commenting on the latest data, Kate Lamb, ABS head of labour statistics said:
The number of unemployed people fell by around 10,000, while the number of employed people grew by around 47,000, in August. This resulted in the unemployment rate remaining steady at 4.2% and the participation rate remaining at its record high of 67.1%.
The growth in employment increased the employment-to-population ratio by 0.1 percentage point to 64.3%, which is just below the November 2023 historical high of 64.4%.
Lamb noted that the high employment-to-population ratio and participation rate "shows that there are still large numbers of people entering the labour force and finding work, as employers continue to look to fill a more than usual number of job vacancies".
So, what does this mean for ASX shares?
According to Lamb:
The employment and participation measures remain historically high, while unemployment and underemployment measures are still low, especially compared with what we saw before the pandemic. This suggests the labour market remains relatively tight.
With unemployment holding steady amid a tight labour market, the RBA will be less likely to feel the need to follow the Federal Reserve and cut interest rates when it meets next Tuesday.
Which means the odds have inched up that investors will need to wait at least until the RBA's next meeting in November for any rate relief down under.
How does this compare to expectations?
The subdued reaction we're seeing among ASX shares comes after the ABS data was largely in line with consensus expectations.
National Australia Bank Ltd (ASX: NAB), for example forecast that the Aussie unemployment rate would remain at 4.2%.
According to NAB (courtesy of The Australian Financial Review):
Employment growth has been especially strong in the past few months, pulling trend employment growth up to a very strong 48,000. Even so, a jump in participation in July saw the unemployment rate increase to 4.2%. That's within the bounds of the RBA's August forecast for the unemployment rate to average 4.3% in Q4.
And prior to the ABS release, the analysts at Westpac Banking Corp (ASX: WBC) said, "We anticipate an around-trend increase in employment of +35,000, enough to keep the employment-to-population ratio broadly steady."
With many investors likely having tuned into these forecasts, there were few surprises from the ABS today to usher in any big moves among ASX shares.
