Australia Enjoys Surprise Jobs Jump Amid Gloom

Australian employment showed a surprising jump in October as firms took on thousands of part-time workers, adding a glimmer of promise to an otherwise grim economic picture.

The government reported 34,300 new jobs in October, confounding market forecasts of a 10,000 drop and bringing gains in the past year to a healthy 225,000. Part-time employment surged 43,500, while full-time positions dropped 9,200.

The jobless rate held at 4.3 percent, when analysts had expected it to tick up to 4.4 percent.

"There is still a ray of sunlight in the overall gloom about the economy," said Michael Blythe, chief economist at Commonwealth Bank. "The underlying message is that the economy is better placed than most to deal with all the array of negatives."

The United States releases its payrolls report for October on Friday and analysts are predicting a fall of around 200,000 in jobs, with the unemployment rate rising to 6.3 percent.

Yet, Australia has not escaped the financial turmoil engulfing the world in recent months, with consumer confidence and spending slumping and business activity contracting sharply.

The darkening global outlook forced the Australian government this week to raise its forecasts for unemployment in the next couple of years. It now sees the jobless rate rising to 5.0 by mid-2009 and to 5.75 percent by mid-2010.

Analysts suspect that might be too optimistic and unemployment could well top 6.0 percent should the coming global recession prove as deep as many fear.
       
A Leading Question

Leading indicators of the labour market, such as vacancies and business surveys, have been trending lower for months now. In particular, the closely watched ANZ survey of job advertisements had fallen sharply in the last few months, dropping 5.9 percent in October alone.

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"All the leading indicators are weak and we put a lot of weight on job ads series," said Su-Lin Ong, a senior economist at RBC Capital Markets.  "Unemployment is going only one way next year, and that's up," she added. "So these figures won't stand in the way of further policy easing."

Investors seemed to think much the same and the Australian dollar managed only a brief bounce on the jobs data before slipping back to $0.6775 U.S. cents. Bill futures continued to imply the Reserve Bank of Australia (RBA) would cut the 5.25 percent cash rate again in December, perhaps matching this week's aggressive reduction of 75 basis points.

Scott Haslem, chief economist at UBS, thinks the RBA will cut rates to 4.75 percent next month, bringing the easing since September to a massive 250 basis points.

"We expect the business surveys to deteriorate even more sharply over coming months as they reflect the intensification of the financial crisis through September and October," he said.

Yet he also saw reason for optimism in the resilience of the labour market so far.

"Today's data is unambiguously a positive for confidence -- with no rise in the unemployment rate to be splashed across tomorrow's press," added Haslem. "And, with the jobs market easing in a relatively orderly way, that's also a positive for income growth into this quarter."

It might even help make the difference between eking out economic growth this quarter, or reporting a contraction.

Copyright 2008 Reuters. Click for restrictions.