Australia Unemployment Climbs But More Find Jobs

Australia's unemployment rate hit its highest in more than two years in January as hiring came to a halt and firms cut costs to meet harsh economic times, keeping pressure on for more monetary and fiscal stimulus.

Government figures out on Thursday showed the jobless rate climbed to 4.8 percent last month, up from 4.5 percent in December and above market forecasts.

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"The bottom line is that no jobs were created in the month and unemployment rose sharply," said Su-Lin Ong, a senior economist at RBC Capital Markets.

"Leading indicators are all telling you that unemployment is going to keep rising and, at current speed, we could be through 5 percent quickly and on our way to 6."

The jobless rate has risen by almost a full percentage point in the past 11 months, though it remains relatively modest compared to harder-hit countries like the United States and Britain.

Indeed, firms also surprised by taking on a net 1,200 new workers in January, confounding forecasts of a 20,500 drop. The rise was outweighed by more people looking for work, but did include a healthy bounce of 33,700 in full-time jobs.

"It says, while weak, Australia will be one of the better performing economies around the world while we go through 2009," said Michael Blythe, chief economist at Commonwealth Bank.

The resilience in employment was enough to lift the Australian dollar around half a U.S. cent, while interbank futures trimmed the chance of another aggressive rate cut from the Reserve Bank of Australia next month.

"It fits with the idea that there are a few signs that policy is actually working, so they might sit back for a while," said blythe. "We think we will see no change in rates in March but the chance of another 50 basis points in April."
       
Outlook Grim    

Just last week, the central bank cut its key cash rate by 1 percentage point to a record low of 3.25 percent, bringing its easing since September to a massive 4 percentage points.

Australia's Labor government also announced a A$42 billion ($27.6 billion) spending package, including one-off payments to low and middle income workers, aimed at supporting employment.

The government on Thursday said it would accept some changes to its package in order to get past objections in the Senate.

There is a sense of urgency as the rising jobless rate is set to become a political hot potato, with the government itself forecasting a rise towards 7 percent next year.

Slumping commodity prices and falling demand from Australia's big Asian customers has seen mining companies shelve expansion plans or close projects entirely.

Last month, miner BHP announced it was cutting 2,100 jobs at its Australian nickel business, while Rio Tinto planned to shed 1,100 worldwide.

And worse was ahead. China this week reported imports had plunged 43 percent in January, compared to a year earlier. The drop was exaggerated by the early timing of the Chinese New Year, but still underlined just how weak global trade had become.

Leading indicators of employment, such as vacancies and job advertisements, have also tumbled in recent months as firms cut back costs to survive in a much tougher world.

A survey of business from National Australia Bank out on Thursday showed conditions last quarter were the worse since the recession of the early 1990s, and firms expected things to get even worse this year.

"Business is clearly positioning itself for tough times ahead," said NAB's chief economist Alan Oster. "That is particularly evident in employment, where labour shedding has been evident in the survey for some time."

The survey's measure of employment dived 18 points to -16 points, while export orders, capital expenditure plans and confidence were all at record lows.

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