Australia Jobless Rate Falls to 6-Month Low in January
Australian employment jumped past all expectations in January, shoving the jobless rate to a six-month low of 5.1 percent and lifting the local dollar half a cent as investors pared back expectations for a cut in interest rates any time soon.
Thursday's figures from the government showed a net 46,300 jobs were created in January, well above forecasts for a 10,000 increase and offsetting a drop of 35,700 in December.
The drop in the jobless rate also confounded forecasts of a rise to 5.3 percent, and seemed to justify the optimism of the Reserve Bank of Australia (RBA) on the outlook for employment.
"It fits with the RBA's view that everything is all right for the moment and must lessen the chance of a cut in March," said Su-Lin Ong, a senior economist at RBC Capital Markets.
"They're going to need a compelling reason to cut again and that's going to take a more sustained rise in unemployment."
The central bank cut rates by half a percentage point over November and December but disappointed some by leaving them unchanged at 4.25 percent at its February policy meeting.
Markets reacted to the jobs news by lifting the Australian dollar to $1.0722, while interbank futures now implied only a 30 percent probability of a cut in March, from 50 percent before the data.
The figures chimed well with an upbeat outlook from RBA Deputy Governor Philip Lowe, who saw good reason to expect solid economic growth and contained inflation in the next two years.
In a speech to an economics conference, Lowe said he expected unemployment to stay low although some rise was possible in coming months.
There was no mention of interest rates, although he said the bank would be watching closely to see if the expansionary lift from a booming mining sector continued to offset the drag from an historically high Australian dollar.
Lowe also indicated the RBA would adjust policy if necessary to take account of rising mortgage rates. In the last few days, Australia's major banks have nudged up their variable home loan rates by 6 to 10 basis points to cover higher funding costs.
That is one reason investors are still wagering the central bank will ease again this year, albeit the move was now more likely to be in May than March.
Thursday's figures showed jobs growth edged up 0.3 percent in January compared to the same month last year. There was no net employment growth at all in 2011, a complete reversal from 2010 when a massive 366,000 jobs were created.
Job losses over 2011 were greatest in manufacturing, which was badly hit by the strength of the Australian dollar, while retail and real estate suffered from more cautious consumers.
The farm sector also shed a large number of jobs in 2011, an odd result given it was a bumper year for major crops thanks to widespread rains.
In contrast, sectors adding jobs included health care, public service, wholesale trade and the booming mining industry. The latter still has big hiring plans as part of huge expansion projects in coal, iron ore and liquefied natural gas.
Just last week, the Australian arm of U.S. oil major Chevron launched a drive to recruit hundreds of engineers to work on two of the country's largest energy projects.
The finance industry was also a solid hirer over 2011, but the outlook is gloomier this year as rising funding costs lead banks to cut staff. Australia and New Zealand Banking Corp this week announced 1,000 jobs would go over 2012, while Westpac is shedding 400.
Overall, the RBA sees employment staying subdued in the near term but expects only a small rise in the jobless rate this year. If this call proves correct, there might not be much need for lower interest rates in coming months.
"The unemployment rate now more clearly looks to be edging back down, and with hiring intentions remaining firm, this is consistent with our view of why the unemployment rate would not rise too much," said Scott Haslem, chief economist at UBS.
"This is clearly a positive for consumer confidence," he added. "It seems unlikely the RBA would ease rates from here unless unemployment jumps sharply over coming months."