SYDNEY, Jan 22 (Reuters) - Australian employment blew past forecasts in December and the jobless rate dropped unexpectedly to a seven-month low, leading markets to narrow the odds of an interest rate hike as soon as next month.
The Australian dollar gained 0.4% to a 15-month peak of $0.6791, while three-year government bond futures fell 7 ticks to 95.735. Investors ramped up the chance of a rate hike from the Reserve Bank of Australia on February 3 to 53%, from 29% before the data.
Figures from the
Australian Bureau of Statistics on Thursday showed the jobless rate fell to 4.1%, the lowest level since May last year, from 4.3%. Analysts had looked for a rise to 4.4%.
Net employment jumped by 65,200 in December from November, when it dropped a revised 28,700. That was way above market forecasts of a 30,000 gain, while full-time jobs rebounded by 54,800.
The participation rate ticked up to 66.7%, from 66.6%, while hours worked rose 0.4%. Annual growth in jobs, however, slowed further to 1.1% in December, down from 3.5% at the start of the year.
"This month we saw more 15-24 year olds moving into employment, contributing to the rise in overall employment and the fall in the unemployment rate," said Sean Crick, ABS head of labour statistics.
The RBA cut interest rates three times last year to 3.6%, but has warned the entire easing cycle could well be over as inflation surged. Headline inflation ran at 3.4% in November, while the trimmed mean measure slowed to 3.3%, but still above the target band of 2%-3%.
Much is riding on the fourth-quarter inflation figures due next Wednesday. Analysts assume a rise of 0.9% or more in the trimmed mean measure of core inflation would sharply narrow the odds for a hike at the RBA's next meeting on February 3.
(Reporting by Wayne Cole and Stella Qiu; Editing by Edwina Gibbs)
