Jobs data on the agenda as signs point to cooling inflation

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All eyes will be on employment figures this week as Australians hope for more positive signs ahead of the Reserve Bank’s first interest rate decision of the year.

A slowdown in job growth is expected to be reflected in the Australian Bureau of Statistics’ December labor force report, due on Thursday.

CommSec economists Ryan Felsman and Craig James say some correction is expected after stronger-than-expected job growth, with 61,500 new jobs in November.

While the unemployment rate remains extremely low compared to historical averages, it has edged higher in recent months, rising 0.1 percentage point between October and 3.9 percent in November.

A soft release of the labor force would encourage households to pray for an end to interest rate hikes after a surprisingly sharp slowdown in inflation.

The ABS reported on Wednesday that November’s consumer price index rose 4.3 percent, up from 4.9 percent in October and the lowest level since January 2022.

Economists had expected a 4.4 percent rise in prices, prompting many to predict the Reserve Bank will keep cash rates unchanged at its first board meeting of 2024 in February.

The rates market predicts that the chances of the RBA raising rates again this cycle are virtually nil, with two cuts priced in by the end of the year.

Nevertheless, an upside surprise when the all-important quarterly CPI figures are released later this month would seriously test market confidence.

NAB economist Taylor Nugent still believes the central bank has one last rate hike in store for February to “better balance the risks around the return to inflation within a reasonable timeframe”.

The economic week starts on Monday with job vacancies data from ANZ and Indeed, along with household spending insights from CBA.

The ABS will also release migration statistics on Tuesday and construction activity data on Wednesday, which will provide further insight into how the construction sector is positioned to provide new homes for Australia’s growing population.

About 40,000 housing starts were completed in the June quarter – just two-thirds of what is needed each quarter to meet the Albanian government’s target of 1.2 million new homes over five years.

Across the Pacific, the US reporting season will accelerate in a week shortened by the Martin Luther King Jr. holiday, with Australians waking up on Tuesday to results from big names like Goldman Sachs and Morgan Stanley.

Alumina giant Alcoa will also report earnings on Wednesday, a week after it announced the closure of its Perth refinery.

The S&P/ASX200 index of the Australian stock market finished 7.7 points lower at 7,498.3 on Friday, down 0.1 percent but up about the same amount for the week.

The broader All Ordinaries fell 6.3 points, or 0.08 percent, to 7,730.5.

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