Consensus expectations heading into the labour market data were for employment to rise +25k and for the unemployment rate to fall to 5.0%. On both metrics the labour market exceeded expectations as the unemployment rate fell to a 10 year low of 4.9%, on a +29.1k rise in new jobs.
Offsetting some of the good news, hours worked fell by 8.4% in Victoria following its lockdown in June, an effect likely to be replicated next month in NSW, due to the current lockdown in Sydney. A rise in underemployment to from 7.4% in May to 7.9% in June, pushed the underutilisation rate higher from 12.5% to 12.8%.
All in all, a good set of numbers that at any other time would prompt the RBA to think about upgrading its unemployment forecasts. However, this is likely to depend on for how long Sydney remains in lockdown.
Turning now to China Q2 GDP which declined from a base effect distorted 18.3% rise in Q1, to a below consensus 7.9% in Q2. The softer Q2 number partially due to the resurgence in Covid in China that impacted catering, travel and entertainment.
The market is expected to look through the slowdown in Chinese growth, comforted by the PBOC’s recent dovish shift that included an increase in aggregate finance and a 50bp cut to the Reserve Requirement Ratio (RRR).
Since our last update in early July, the ASX200 has continued to consolidate the strong gains from the first half 2021, between 7400 on the topside and 7200 on the downside. This type of sideways price action is not uncommon at this time of the year as viewed in July 2017 and again in 2020.
As such, the view remains unchanged and we retain a preference to buy weakness in the ASX200 towards uptrend support coming 7100/7000 area.