Australia Unemployment Is Up, Full-Time Jobs Surge
Unemployment in Australia unexpectedly ticked up from 33-year lows in October but the number of full-time jobs increased by the biggest amount in 16 years, underlining the continued strength of the economy.
Thursday's data from the government showed employers created a net 12,900 new jobs in October, short of market forecasts of a 20,000 gain. The jobless rate edged up to 4.3 percent, from a trough of 4.2 percent in September.
However, full-time employment jumped a huge 70,600 as more workers switched from part-time jobs. Analysts took that as a robust sign, given full-time posts tend to pay more and offer greater security.
"The headline numbers are a tad below consensus but the details are very strong," said Su-Lin Ong, senior economist at RBC Capital Markets. "Full-time jobs surged, it's a huge number," she added. "It's a report that confirms a very strong and healthy labour market."
Investors were too preoccupied with a revival in global credit concerns to give the data much attention. The S&P/ASX 200 Index sank 2.6 percent following a slide in U.S. equities while bond gained on safe-haven flows.
In any case, the jobs figures were considered too mixed to clarify the near-term risk of another rise in domestic rates.
Only the day before, the Reserve Bank of Australia (RBA) lifted interest rates to a decade high of 6.75 percent, warning the economy had to cool if inflation was to be restrained.
Underlying inflation has already accelerated to the very top of the central bank's 2 to 3 percent comfort zone and was expected to break above it by year-end.
Inflation Taking Off
With inflation taking off and the economy firing on all cylinders, investors have already priced in a tightening to 7.0 percent by March and the risk of a further move beyond.
"The RBA would look at today's jobs report and conclude the labor market is still very tight indeed," said Kieran Davies, chief economist at ABN AMRO. "With inflation rising, it will have to be worried that wage pressures will emerge and companies will get more pricing power."
The latest gains in employment brought the increase in jobs in the past 12 months to 280,800, an impressive number for an economy with a labor force of just 11 million.
Forward-looking indicators also point to continued strength with job advertisements in newspapers and on the internet reaching record highs in October while a range of business surveys showed healthy demand for labor.
But while a dearth of skilled workers has seen firms bid up wages in in the booming mining and construction sectors, wages growth across the whole economy has been remarkably restrained.
The RBA noted in its post-hike statement on Wednesday that growth in labor costs had been contained so far and high levels of business investment were adding to productive capacity.
The key measure of wages in Australia has been showing growth of around 4.0 percent a year for some time now, short of the 4.5 percent speed limit that analysts consider a threat to inflation.
All of which highlights the importance of the next wages report for the third quarter, due on Nov. 14.
"A steady unemployment rate, to the extent it measures the degree to which the labor market is tightening, holds some hope that next week's wages data shows the annual pace still running near 4 percent," said Scott Haslem, chief economist at UBS.
"We are looking for a 1.1 percent rise in the quarter, and anything higher will materially lift the chances of a December RBA hike," he added.