The release of US Employment data on Friday night confirmed that the pace of employment growth in the US was in line with expectations.

The slowest pace of job growth since December 2020 was topped off by average hourly earnings which increased by 4.2% YoY in March, its smallest increase since June 2021, supporting the idea that the Fed is very close to ending its tightening cycle.

The next important set of jobs data for traders is the Australian Labour Force report for March, released Thursday morning at 11.30 am AEST.

What is expected?

After declines in December (-16.6k) and January (-10.9k), employment bounced back in February, increasing by +64.6k.

With holiday period seasonal volatility now in the rear vision mirror, the market is looking for a +20k rise in jobs and for the unemployment rate to rise to 3.6% in March from 3.5% in February.

What would constitute a surprise?

The market will look for evidence of moderation in the labor market (as viewed in the US last Friday night) to support market pricing that the RBA’s rate hiking cycle will remain on hold.

To this effect, should the unemployment rate print at 3.7% or higher, it would be a good guide that the RBA will stay on the sidelines in May (pending Q1 inflation data) and spark further conversation around RBA rate cuts in the second half of this year. However, this would be a small negative for the AUD/USD.

Conversely, should the unemployment rate print at 3.5% or lower, and if Q1 2023 CPI data (released on April 26th) is hotter than expected, it would likely force the RBA to lift the cash rate again by 25bp to 3.85% as early as its May meeting.

In turn, this would be a small net positive for the AUD/USD.

Australian employment rate chart