Jobs Data Offers No Smoking Gun For Interest Rate Cuts Next Week

Economists Pull Back on Rate Cut Bets

Unemployment Rise Fails to Offer 'Smoking Gun' Evidence

Markets Rally Despite Job Data

Expectations for aggressive rate cuts by the Reserve Bank of Australia (RBA) have been tempered after the release of unemployment data that showed a modest increase but lacked conclusive evidence of a significant economic slowdown.

The unemployment rate unexpectedly rose to 3.7% in April, up from 3.5% in March. However, economists had anticipated a sharper increase, with some forecasts suggesting a rise to 3.9% or even 4.0%. The data also showed a solid increase in employment, with 88,400 jobs added in April.

As a result, markets have pared back their expectations for rate cuts, with some economists now predicting only two quarter-point cuts in 2024 instead of the six previously anticipated. The Australian dollar initially weakened against the U.S. dollar following the release of the data but later rebounded and was trading marginally higher.

Despite the lack of a clear signal from the unemployment data, Wall Street rallied on Friday, with the Dow Jones Industrial Average rising 2.1%, the S&P 500 gaining 1.8%, and the Nasdaq Composite climbing 1.7%. Investors interpreted the softer-than-expected job growth as a sign that the Federal Reserve may not need to raise interest rates as aggressively as previously feared.