Unemployment in Australia fell unexpectedly

The unemployment rate fell to 3.4%, the lowest level since 1974, from 3.5% a month earlier, data showed Thursday. Employment rose by 32,200 in October, more than double the 15,000 increase that had been projected.

The data, along with Wednesday's favorable payrolls report, bolstered the RBA's rapid tightening of policy as it tries to contain the fastest inflation in 30 years. Labor market resilience is one of the main reasons the central bank believes it can provide a soft landing to the economy.

Australian shorter-end government bond yields rose after the report, while the currency was little changed as the data did little to change expectations for a quarter percentage point hike in December to bring the rate level to 3.1%.

Josh Williamson, an economist at Citigroup Inc, said the report is confirmation that the labor market remains incredibly tight, which will increase wage pressures in the coming months. He now sees a hawkish outlook in which the RBA could continue raising rates beyond 3.35% in 2023.

Data on Wednesday showed that labor market tightness is finally putting pressure on wages, as wage growth came in at 3.1%, the fastest pace in nearly 10 years. The RBA predicts the economy will accelerate to 3.9% growth by December 2023, with the unemployment rate holding in the 3.4%-3.5% range through the middle of next year.

Shreya Sodhani, an economist at Barclays Bank Plc, noted that the strengthening labor market is also reflected in wage levels, and in their view, the emergence of some disruption in December is less likely, especially amid good employment and wage reports.