By Stella Qiu

SYDNEY (Reuters) – Australian employment accelerated in December forecasts even though the unemployment rate was higher as more people looked for work – a combination of trends that signaled a healthy labor market that left alive to the chance of a near-term reduction in rates.

Due to an increase in part-time roles, net employment jumped to 56,300 in December from November when it rose to a lower-revised 28,200, according to figures from the Australian Bureau of Statistics on Thursday.

The December jump was above a market consensus for a rise of 15,000.

Annual job growth accelerated to a robust 3.1%, more than double the historical average. The labor force also increased at the same rate.

The unemployment rate rose to 4.0% from 3.9%, as expected, while the participation rate rose to a record high of 67.1% from 67.0%.

“Overall it’s a bit choppy, but you can identify the labor market as remaining strong … It still leaves the basic message that the labor market remains tight,” said Shane Oliver, chief economist. of AMP (OTC:).

The slowdown in wage growth also suggests that the labor market is not a source of inflationary pressures.

“This kind of leaves the Reserve Bank in a difficult position then … I think in the end the rate call for February will depend on the December quarter inflation numbers when they come out,” said Oliver.

The RBA expects underlying inflation in the fourth quarter to come in at 0.7%. Anything below that figure would make it harder for the RBA not to cut rates next month, Oliver said.

The market’s reaction to the jobs data was muted. The Australian dollar rose 0.1% to $0.6230. Three-year bond futures pared earlier gains but were still up 8 ticks at 96.06 thanks to good inflation figures from Britain and the US overnight.

The swaps still imply a 68% probability that the RBA will cut rates on February 18, after the quarterly inflation report and another reading on retail sales is expected to show a pull-back in sales in December after a strong showing last month.

The RBA kept its policy steady for a year, judging that the current cash rate of 4.35% – up from 0.1% during the pandemic – is tight enough to bring inflation to the target band of 2-3 % while preserving job gains.

The central bank unexpectedly turned dovish last month as economic growth remained anemic. The pick-up in consumer spending has frustrated even the government’s tax cuts.

Thursday’s data showed that part-time jobs jumped by 80,000 in December, while hours worked rose a strong 0.5%.

“We see no evidence of a slowdown in the labor market, and the labor market alone does not warrant the RBA to reduce policy rates in the near term,” said Faraz Syed, an economist at Citi.

“We keep the timing of the first rate cut unchanged for May 2025, but note that the risks of a lower CPI may allow the RBA to bring forward rate cuts.”