Australia Employment Slips in December, Jobless Up
Australian employment fell unexpectedly in December, nudging the jobless rate up to 5.4 percent and pushing the local dollar down as the market narrowed the odds of further cuts in interest rates in coming months.
The local dollar lost a quarter of a U.S. cent after the Australian Bureau of Statistics reported 5,500 net jobs were lost in December, below forecasts of a flat outcome. All the losses came in full-time employment which dropped 13,800.
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Analysts suspect the jobless rate will continue to creep higher from here given sluggish domestic demand and the pressures of a historically high currency.
"It keeps rate cuts alive," said Matthew Johnson, interest rate strategist at UBS. "You'd think the unemployment rate would be a bit higher, but it does seem fairly certain that the labour market is slackening."
The market is pricing in at least one more easing in interest rates following the Reserve Bank of Australia's (RBA) cut to a record-matching low of 3 percent back in December.
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Interbank futures show a one-in-three chance of a move at the RBA's next policy meeting on Feb. 5, though swap rates imply an eventual move to 2.5 percent this year.
The RBA has forecast that unemployment would only rise "a little further" in coming months. Many analysts see a risk it could increase steadily toward 6 percent as a boom in mining investment begins to plateau later this year.
Public Belt Tightening
Even after the dip in December, annual growth in employment still picked up to 1.3 percent, from 1.1 percent in November, bringing it nearer the historical trend of around 1.6 percent.
Figures on the breakdown by industry for the year to November showed the public sector had been the biggest shedder of labor, losing 39,000 positions as the Federal and State governments tightened to rein in budget deficits.
The construction sector had also been hit by a subdued housing market, though there was a promising uptick in employment late in the year.
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Building products maker Boral made headlines this week when it announced 700 job cuts across its Australian business. The RBA is hoping that lower rates will fuel a revival in home construction this year, although the improvement has been slow so far.
Employment did turn up in both retailing and accommodation and restaurants, two sectors that had been pressured by a high local currency and intense competition.
Healthcare had another strong year and, with 1.37 million workers, is the single biggest employer. The sector is expected to only grow larger as Australia's population ages.
Other readings on labor demand have been mixed. A measure of job advertisements in newspapers and on the internet from ANZ has been particularly week, falling for a tenth month in December.
Yet a leading indicator of employment calculated by the government rose for the sixth straight month in January, a result that historically has consistently pointed to a pick up in jobs growth ahead.