Australia unemployment rate expected to rise back to 3.9% in March as February boost fades

• The Australian Unemployment Rate is expected to have ticked higher in March.
• Employment Change is foreseen losing momentum after the outstanding February figure.
• AUD/USD corrective advance may provide bears the chance to sell at higher levels.

Australia will publish its monthly employment report first thing Thursday. The Australian Bureau of Statistics (ABS) is expected to announce the country added measly 7.2K new positions in March after the outstanding 116.5K jobs created in February. The Unemployment Rate is foreseen at 3.9% after dropping to a six-month low of 3.7% in the previous month. In February, the trend unemployment rate remained at 3.8% for the sixth month in a row.

Australia reports the monthly Employment Change split into full-time and part-time positions. Generally speaking, full-time jobs imply working 38 hours per week or more and usually include additional benefits, but they mostly represent consistent income. On the other hand, part-time employment generally means higher hourly rates but lacks consistency and benefits. That's why the economy prefers full-time jobs.

Scrutinizing the impressive February headline, Australia created 38.3K part-time roles and added a whopping 78.2K full-time ones. "The large increase in employment in February followed larger-than-usual numbers of people in December and January who had a job that they were waiting to start or to return to. This translated into a larger-than-usual flow of people into employment in February and even more so than February last year," according to the official ABS report. 

Australian unemployment rate expected to bounce back in March

Market analysts anticipate the Australian Unemployment Rate increased to 3.9% in March after declining to 3.7% in February. As mentioned before, the country is expected to have added 7.2K new jobs following 116.5K positions added in February.

The labor sector in Australia has remained relatively strong over the past few months, although, opposite to other major counterparts, the Reserve Bank of Australia (RBA) does not seem to care about whether the job market remains tight. 

As widely anticipated, the RBA kept its policy rate unchanged for the third straight meeting at 4.35% when it met in March. For a change, policymakers scrapped any reference to possible further increases, pushing AUD/USD lower. 

"If our forecasts come true, and I really hope we're on that narrow path that Phil (Lowe - former RBA Governor) used to talk about, then we can slow the economy enough that it preserves a lot of the gains in employment and brings inflation down," Governor Michele Bullock noted, following the central bank meeting. The Board is hopeful they will head into a soft landing as long as inflation remains subdued. 

The Australian Bureau of Statistics (ABS) publishes the Consumer Price Index (CPI) quarterly. According to the latest release, the CPI rose 0.6% in the last quarter of 2023 and 4.1% in the 12 months to December 2023. The RBA's inflation goal is between 2% and 3%.

It is worth mentioning that wage growth is reported separately. The ABS also offers a quarterly report, with the latest showing the seasonally adjusted Wage Price Index (WPI) rose 0.9% in the last quarter of 2023 and 4.2% over the year.  At this point, wage growth continues to outstrip inflation, but it's not something to care about today.  

When will the Australian employment report be released, and how could it affect AUD/USD?

The ABS will publish the February employment report on Thursday. As previously stated, Australia is expected to have created 7.2K new jobs in March, while the Unemployment Rate is foreseen at 3.9%. The Participation Rate was reported at 66.7% in February.

The tepid job creation and the modest uptick in the Unemployment Rate should not be a problem for the RBA. A much stronger than-anticipated report, however, may be read as a delay in rate cuts. The market isn't rushing to bet on it, which means the Aussie will likely take advantage against the US Dollar in such a scenario. 

A poor outcome on the contrary, and given broad USD strength, AUD/USD may fall to fresh 2024 lows.

From a technical perspective, Valeria Bednarik, Chief Analyst at FXStreet, notes: "The AUD/USD pair set a fresh 2024 low on Tuesday at 0.6388, as broad US Dollar demand in a risk-averse environment dominates financial boards. The pair is up ahead of the announcement, but the advance seems corrective. Speculative interest is adjusting rate-cut expectations while digesting the latest Middle East developments. The modest improvement in sentiment is short of confirming fears are gone, which means the case for a lower low is alive and kicking." 

Bednarik adds: "AUD/USD is bearish, given that it is developing below all its moving averages in the daily chart. The 20 Simple Moving Average (SMA) heads firmly south below the 100 and 200 SMAs and over 100 pips above the current level, reflecting bears' strength. Technical indicators recovered modestly from oversold readings but lack momentum enough to confirm an interim bottom. AUD/USD has near-term support at 0.6410, followed by the aforementioned 2024 low. Once below the latter, the slide could extend initially towards 0.6350, en route to 0.6315. On the contrary, immediate resistance can be found at 0.6470, followed by the 0.6530 pierce zone. It is worth adding that, once the dust settles and in the case of a bullish run, sellers may take their chances to keep the pair in the bearish path."