The latest data from the Australian Bureau of Statistics (ABS) shows that net employment increased by 44000 in January, far exceeding market expectations of 20000 and continuing the strong momentum of a 60000 person increase in December last year. This trend indicates that the resilience of the Australian labor market is still ongoing, with female employment growth being one of the main driving forces.

In addition, the annualized growth rate of employment in Australia has reached 3.5%, indicating that labor demand remains strong. However, while employment increased, total working hours decreased by 0.4%, indicating that the new job opportunities may be more concentrated in part-time or temporary jobs rather than full-time positions.

The unemployment rate has slightly increased, and there is an imbalance between supply and demand in the labor market

Despite strong employment growth, the unemployment rate still rose slightly to 4.1%, in line with market expectations. This is mainly attributed to the participation rate reaching a historical high of 67.3%, which means that more people are entering the labor market to find jobs, making it difficult to fully absorb all job seekers for new employment. In addition, the significant increase in the number of people waiting to join indicates a possible short-term mismatch between supply and demand in the labor market.

Employment data boosts short-term confidence, but long-term direction is still influenced by policies

The short-term rebound of the Australian dollar is mainly supported by the following two aspects:

The employment data exceeded expectations, and market expectations for the Reserve Bank of Australia (RBA) to cut interest rates have cooled down - a strong job market may allow the RBA to maintain current interest rate levels in the short term rather than immediately considering a rate cut.

Global market risk sentiment is recovering - as optimistic expectations for the US economic outlook heat up, safe haven funds are flowing out of the US dollar, supporting commodity currencies including the Australian dollar.

However, the long-term trend of the Australian dollar still faces challenges:

The rising unemployment rate in Australia still leaves uncertainty about the future policy direction of the RBA. If the future job market softens, the RBA may have to consider relaxing policies to prevent further downward pressure on the economy.

AUD/USD Market Trend Chart

Federal Reserve policy trends. If the Federal Reserve delays interest rate cuts, the US dollar may maintain its strength, thereby putting pressure on the Australian dollar.

Editor's viewpoint:

The strong performance of the Australian job market has provided some support for the Australian dollar in the short term, and the market's expectations for RBA interest rate cuts have cooled down. However, the rising unemployment rate, decreasing working hours, and global economic uncertainty may limit the rebound potential of the Australian dollar.