Jobs rebound hard
I noted on Twitter that there could easily be a +50,000 rebound in headline employment in December after last month's surprise drop.
In the event, we got +65,200, a huge rebound to a new high of 14.68 million employed persons.
Looking through the seasonal volatility and noise, the 3-month average employment growth was about +25,000 in Q4 2025, in line with what we saw back in Q2.
Over the year, employment increased by around +165,000, or a somewhat more sedate +1.1 per cent.
Interestingly, this is a far slower rate of growth than was seen in the aged 15+ civilian population, which reaccelerated as the year went on to +426,000 or +1.9 per cent.
It's not difficult to see why housing supply targets are not being met, while rents and construction costs appear to have reaccelerated.
However, the labour force participation rate is well down from the highs, down by -0.4pts from 67.1 per cent to 66.7 per cent over the year to December 2025.
As such we got a huge drop in the seasonally adjusted monthly reported unemployment rate to just 4.1 per cent, down from 4.4 per cent in September and the lowest since May 2025.
The seasonally adjusted underutilisation rate also dropped from 6.2 per cent to just 5.7 per cent.
Overall, even allowing for the wild volatility, this was a much stronger result than expected - in fact, the median market forecast from economists was for an unemployment rate of 4.4 per cent!
The 3-year bond yield jumped to above 4.2 per cent, and the Aussie dollar has continued its screaming run higher up to above 68 US cents.
The wrap - what next?
This stronger than expected result puts a February interest rate hike squarely in the frame at about a 50:50 chance.
The final call will be determined by the December quarter inflation figures.
On the one hand, the monthly inflation figures pointed to some apparent downside risk for Q4 inflation (indeed, Westpac
have now revised down their forecast to just 0.5 per cent headline, and 0.7 per cent for trimmed mean inflation).
On the other hand, there are some signs that rents and construction costs have picked up again, and record crowds at the Ashes, the Australian Open, and some 40,000 punters at the first day of the new Sydney fish markets (versus a 5,000 capacity) all seem to speak to an ebullient consumer.
The key inflation figures will be released next week on Wednesday morning.
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