Australian Labour Market Update and U.S. Federal Reserve Policy Adjustments: Key Economic Insights for Investors
Source: Kapitales Research
Australian Labour Market
Australia's labour market showed signs of cooling in November, with employment declining by 23,100, marking the largest drop in nine months. This followed a significant increase of 41,200 jobs in October, and the result fell well below market expectations of a 20,000 gain. Notably, full-time jobs decreased by 56,500. Annual job growth slowed to 1.3%, down from 3.5% at the start of the year, and now lags behind the country’s 2% population growth.
Despite this, the unemployment rate remained stable at 4.3%, exceeding analysts’ expectations for an uptick to 4.4%. The participation rate decreased slightly to 66.7%, and hours worked stabilized after a period of growth. Analysts have noted that some of the weakness in November could be attributed to a temporary adjustment after the strong October job figures, suggesting that underlying trends indicate a gradual loss of momentum in the labour market.
The Reserve Bank of Australia (RBA) is expected to maintain its cautious approach to interest rates, with a 23% chance of a rate hike in February and a 70% probability of a hike in May. While the RBA kept rates unchanged at 3.6% in its latest meeting, it remains concerned about inflation, which has been rising steadily. Headline inflation reached 3.8% in October, with the trimmed mean measure at 3.3%, above the midpoint of the RBA’s target range of 2%-3%. With the economy growing at its fastest pace in two years, largely driven by business, government, and consumer spending, the RBA may consider further rate hikes to address inflationary pressures and manage labour market tightness.
Source: Kapitales Research
U.S. Federal Reserve Economic Update
Meanwhile, across the Pacific, the Federal Reserve (Fed) provided an update on the U.S. economic landscape with its Federal Open Market Committee (FOMC) statement. While the U.S. economy has continued to expand at a moderate pace, job gains have slowed considerably in recent months, with the unemployment rate edging upward.
Inflation has been creeping back after a period of stabilization, prompting the Fed to adjust its monetary policy. On December 10, 2025, the Fed lowered the target range for the federal funds rate by 0.25 percentage points to a new range of 3.5% to 3.75%. This reduction is aimed at mitigating risks to employment while balancing the dual mandate of achieving maximum employment and keeping inflation near the target rate of 2%.
The Fed expressed concerns about the elevated uncertainty surrounding the economic outlook, signalling that additional rate cuts may be on the table if economic conditions worsen. Despite these cautionary steps, the Fed remains committed to supporting the labor market and returning inflation to its target.
Federal Reserve to Purchase $40 Billion in Treasury Bills to Ease Short-Term Funding Pressures
The Federal Reserve has announced that it will begin purchasing $40 billion of Treasury bills per month starting this Friday. This initiative is aimed at alleviating short-term funding pressures by replenishing reserves in the financial system. In a statement, the central bank highlighted that reserve balances had decreased to insufficient levels, prompting the need for ongoing purchases of shorter-term Treasury securities. Recent signals from money markets have indicated growing strains within the $12.6 trillion market, particularly as the Fed has been reducing its balance sheet. The Fed's actions are intended to address these liquidity concerns and maintain stability in the financial system.
Market Impact and Investor Outlook
The sharp decline in Australian employment in November, coupled with a slowdown in annual job growth, signals a cooling labour market that may alleviate some of the pressures for an immediate rate hike by the Reserve Bank of Australia (RBA). While the unemployment rate remained stable at 4.3%, the drop in full-time jobs and the decline in the participation rate indicate underlying weaknesses in the economy. Despite this, inflation remains elevated, with the RBA likely to maintain a cautious stance. The market currently prices in a 23% chance of a rate hike in February, with a more significant likelihood in May, suggesting that investors expect gradual tightening to continue.
The U.S. Federal Reserve’s recent decision to lower the federal funds rate underscores the delicate balancing act central banks face between curbing inflation and fostering employment growth. The Fed’s cautious stance highlights the growing economic uncertainties and inflationary pressures. Investors should factor in the broader implications of this rate cut, as it could affect stock market performance, bond yields, and inflation expectations in the coming months.
Conclusion
The Australian labour market appears to be losing momentum, with recent data suggesting that the economy may be running near its capacity. Despite this, inflation remains a key concern, and the RBA’s decision to hold rates at 3.6% and rule out further easing highlights the delicate balance between supporting economic growth and curbing inflation. Investors should watch for further indicators of labour market softening and inflation trends, as these will influence the RBA’s policy decisions and broader market sentiment.
On the other hand, the U.S. Federal Reserve’s decision to cut interest rates reflects a proactive stance in mitigating employment risks amidst ongoing inflationary pressures. Investors should take a balanced approach, being mindful of potential volatility as global economic conditions evolve. Staying informed about macroeconomic indicators such as employment trends and monetary policy decisions will be crucial for making well-timed investment choices in the coming months.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
Disclosure: The information mentioned above has been sourced from the company reports and a third-party database, i.e. Koyfin. Investors are advised to use strict stop-loss to protect their investments in case of any unfavorable/uncertain market events.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au
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Australian Labour Market Update and U.S. Federal Reserve Policy Adjustments: Key Economic Insights for Investors
Australian Labour Market
Australia's labour market showed signs of cooling in November, with employment declining by 23,100, marking the largest drop in nine months. This followed a significant increase of 41,200 jobs in October, and the result fell well below market expectations of a 20,000 gain. Notably, full-time jobs decreased by 56,500. Annual job growth slowed to 1.3%, down from 3.5% at the start of the year, and now lags behind the country’s 2% population growth.
Despite this, the unemployment rate remained stable at 4.3%, exceeding analysts’ expectations for an uptick to 4.4%. The participation rate decreased slightly to 66.7%, and hours worked stabilized after a period of growth. Analysts have noted that some of the weakness in November could be attributed to a temporary adjustment after the strong October job figures, suggesting that underlying trends indicate a gradual loss of momentum in the labour market.
The Reserve Bank of Australia (RBA) is expected to maintain its cautious approach to interest rates, with a 23% chance of a rate hike in February and a 70% probability of a hike in May. While the RBA kept rates unchanged at 3.6% in its latest meeting, it remains concerned about inflation, which has been rising steadily. Headline inflation reached 3.8% in October, with the trimmed mean measure at 3.3%, above the midpoint of the RBA’s target range of 2%-3%. With the economy growing at its fastest pace in two years, largely driven by business, government, and consumer spending, the RBA may consider further rate hikes to address inflationary pressures and manage labour market tightness.
U.S. Federal Reserve Economic Update
Meanwhile, across the Pacific, the Federal Reserve (Fed) provided an update on the U.S. economic landscape with its Federal Open Market Committee (FOMC) statement. While the U.S. economy has continued to expand at a moderate pace, job gains have slowed considerably in recent months, with the unemployment rate edging upward.
Inflation has been creeping back after a period of stabilization, prompting the Fed to adjust its monetary policy. On December 10, 2025, the Fed lowered the target range for the federal funds rate by 0.25 percentage points to a new range of 3.5% to 3.75%. This reduction is aimed at mitigating risks to employment while balancing the dual mandate of achieving maximum employment and keeping inflation near the target rate of 2%.
The Fed expressed concerns about the elevated uncertainty surrounding the economic outlook, signalling that additional rate cuts may be on the table if economic conditions worsen. Despite these cautionary steps, the Fed remains committed to supporting the labor market and returning inflation to its target.
Federal Reserve to Purchase $40 Billion in Treasury Bills to Ease Short-Term Funding Pressures
The Federal Reserve has announced that it will begin purchasing $40 billion of Treasury bills per month starting this Friday. This initiative is aimed at alleviating short-term funding pressures by replenishing reserves in the financial system. In a statement, the central bank highlighted that reserve balances had decreased to insufficient levels, prompting the need for ongoing purchases of shorter-term Treasury securities. Recent signals from money markets have indicated growing strains within the $12.6 trillion market, particularly as the Fed has been reducing its balance sheet. The Fed's actions are intended to address these liquidity concerns and maintain stability in the financial system.
Market Impact and Investor Outlook
The sharp decline in Australian employment in November, coupled with a slowdown in annual job growth, signals a cooling labour market that may alleviate some of the pressures for an immediate rate hike by the Reserve Bank of Australia (RBA). While the unemployment rate remained stable at 4.3%, the drop in full-time jobs and the decline in the participation rate indicate underlying weaknesses in the economy. Despite this, inflation remains elevated, with the RBA likely to maintain a cautious stance. The market currently prices in a 23% chance of a rate hike in February, with a more significant likelihood in May, suggesting that investors expect gradual tightening to continue.
The U.S. Federal Reserve’s recent decision to lower the federal funds rate underscores the delicate balancing act central banks face between curbing inflation and fostering employment growth. The Fed’s cautious stance highlights the growing economic uncertainties and inflationary pressures. Investors should factor in the broader implications of this rate cut, as it could affect stock market performance, bond yields, and inflation expectations in the coming months.
Conclusion
The Australian labour market appears to be losing momentum, with recent data suggesting that the economy may be running near its capacity. Despite this, inflation remains a key concern, and the RBA’s decision to hold rates at 3.6% and rule out further easing highlights the delicate balance between supporting economic growth and curbing inflation. Investors should watch for further indicators of labour market softening and inflation trends, as these will influence the RBA’s policy decisions and broader market sentiment.
On the other hand, the U.S. Federal Reserve’s decision to cut interest rates reflects a proactive stance in mitigating employment risks amidst ongoing inflationary pressures. Investors should take a balanced approach, being mindful of potential volatility as global economic conditions evolve. Staying informed about macroeconomic indicators such as employment trends and monetary policy decisions will be crucial for making well-timed investment choices in the coming months.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
Disclosure: The information mentioned above has been sourced from the company reports and a third-party database, i.e. Koyfin. Investors are advised to use strict stop-loss to protect their investments in case of any unfavorable/uncertain market events.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au