[ForexNews]

Australian employment data once again surprised significantly to the upside. Employment grew by 31,200 jobs in November against market expectations for a 5,000 jobs rise. The unemployment rate was again the largest surprise, falling to 5.7% from 5.8%, against market expectations for a rise to 5.9%.

The pressure point in the FX market is likely the AUD/NZD cross. The market potentially got short this cross after the surprisingly hawkish RBNZ this morning. So this cross could grind higher through the day.

There are two important takeaways from these data: first, three months of significantly above-average employment growth removes any doubt that employment demand is rebounding.

Second, the unemployment rate continues to hover significantly below 6% and increasingly looks as though it has topped out. If the unemployment rate starts to head significantly lower, it will place more pressure on the RBA to accelerate its tightening cycle. Analysts do not expect that quite yet, however, continue to look for a just one 25bp rate hike from the RBA in Q1 10.

Some think that growing labour supply on the back of higher levels of migration and rising labour force participation (higher interest rates push up the latter), will help keep the unemployment rate elevated and around 5.8%. Some are wary of the fact that y/y labour force growth is so far running at only average levels. So, employment growth is threatening to chew through labour supply relatively quickly.