ASX 200 hits three-month low as strong jobs data kills rate cut hopes
Australia's jobless rate fell to 4.3% but the ASX 200 tumbled 1% as bond yields spiked, crushing hopes for near-term RBA rate cuts.
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KEY POINTS
- Australia added 42,000 jobs in October, double market expectations and the strongest monthly gain in the second half of 2025, pushing unemployment down to 4.3% from 4.5%.
- The Australian 10-year bond yield spiked 5 basis points to 4.43%, its highest level since May, triggering a 3.1% plunge in the Real Estate Index and sending the ASX 200 to a three-month low.
- Economists at RBC Capital Markets declared the RBA easing cycle over, while even dovish forecasters at AMP say the bar for rate cuts is "very high" with unemployment tracking in line with RBA forecasts.
Australia's unemployment rate fell back to 4.3% in October from 4.5% in the previous month and beating consensus expectations of 4.4%.
The improvement was driven by a 42,000 increase in the number of employed people, well above market expectations of 20,000 and marking the best monthly gain in the second half of 2025.
Other key takeaways from the October ABS jobs report include:
“This month more unemployed people moved into employment compared to a typical October,” said ABS Head of Labour Statistics Sean Crick.
The participation rate held steady at 67%, consistent with the past twelve months.
Annual employment growth accelerated to 1.6% year-on-year, up from 1.3% in the previous month.
The underutilisation rate, which includes both the unemployed and those seeking more hours, declined 0.3 percentage points to 10.0%.
ASX 200 dips
The S&P/ASX 200 was down around 0.2% heading into the 11:30 am AEDT release. Within minutes of the data hitting screens, the index accelerated its decline, falling as much as 1.01% by 11:47 am.
ASX 200 intraday chart, Thursday 13 November | Source: TradingView
The stronger-than-expected jobs data triggered a spike in bond yields, with the Australian Government 10-year yield rising 5 bps to 4.43%, its highest level since May.
Australian Government 10-year yield chart (Source: TradingView)
This drove a sharp selloff in yield-sensitive sectors. The S&P/ASX 200 Real Estate Index plunged 3.1% to a near five-month low, while every sector traded in the red except Materials.
What are economists saying?
AMP Economist My Bui struck a slightly dovish tone: "While the fall back in the unemployment rate to 4.34% is a bit below our forecast, we think that the broad trend has remained intact. The labour market is still easing, albeit slowly, and the unemployment rate is still heading up."
"Going into 2026, the bar for any more rate cuts from the RBA is very high. But we do see room for one more cut, as our base case is for the unemployment rate to increase to 4.6%."
RBC Capital Markets' chief economist Su-Lin Ong took a more hawkish view: "The unexpected strength in October labour force including the details will keep the RBA sidelined and suggests that policy settings that are modestly restrictive are both appropriate and prudent."
"We think this RBA easing cycle is over and expect the RBA to sit on the sidelines for the foreseeable future."
The bond market's reaction appears to support Ong's view. With the unemployment rate tracking in-line with the RBA's latest statement on monetary policy forecasts, the case for near-term rate cuts has pretty much vanished.
ASX 200 diverges from
The ASX 200 is now down 4.1% from its 21 October record high and trading at a fresh three-month low. This comes at an awkward time as the Dow hit its second straight record high overnight, while all other major US benchmarks (S&P 500, Nasdaq and Russell 2000) remain within 2-3% of all-time highs.
While the local market is trading lower, there are a few bright spots. The S&P/ASX 200 Materials Index is currently on a four day win streak, up 4.9% and within 1% of all-time highs. This move has been supported by broad strength across the commodity spectrum, spanning gold, copper, lithium and more.
