Australia jobs enjoy bumper October in broadly strong report

  • Figures from the Australian Bureau of Statistics (ABS) out on Thursday showed a net 32,800 new jobs were created in October, up from 7,800 the month before and surpassing market forecasts of a 20,000 increase.

Carla Gottgens | Bloomberg | Getty Images

Australian employment was surprisingly strong in October as firms took on more full time staff and the jobless rate stayed at its lowest since 2012, a bumper report that sent the local dollar skipping higher.

Figures from the Australian Bureau of Statistics (ABS) out on Thursday showed a net 32,800 new jobs were created in October, up from 7,800 the month before and surpassing market forecasts of a 20,000 increase.

Even better, full-time positions that tend to offer fatter wages and greater security grew by a hefty 42,300, bringing gains in the past year to 238,800.

The jump in jobs helped absorb a rise in new job seekers and kept the unemployment rate at 5.0 percent, when analysts had thought it might edge back up to 5.1 percent.

A sharp fall in the jobless rate in September had at first looked like a statistical quirk, but the broad strength in this report suggested the improvement was lasting.

"More people looking for jobs, more people finding jobs, more hours worked and a jobless rate at 6-year lows. What's not to like?" said CommSec chief economist, Craig James.

"Price inflation is still contained but the extent of the tightening of the job market makes it hard to believe that the Reserve Bank will stay on the rate sidelines until 2021 as some analysts currently expect."

Investors reacted by pushing the local dollar up 0.6 percent to $0.7279. Odds on a hike in the 1.5 percent cash rate narrowed slightly, though futures still implied only a two-in-three chance of a move by the end of 2019.

Just last week the Reserve Bank of Australia (RBA) held steady at its November policy meeting and reiterated its outlook for only a gradual pick up in inflation.

A big concern has been the reluctance of firms to pay their workers more. Figures out Wednesday showed only a modest pick up to 2.3 percent in the year to September, and even that was due to a mandated rise in the minimum wage.

Pay growth in the private sector stayed stuck at 2.1 percent, a whisker above the all-time trough of 1.9 percent and only just ahead of inflation.

"The RBA needs higher wage growth so households can manage higher interest rates, even if the tightening cycle is likely to be very modest by historical standards," said Annette Beacher, chief Asia-Pacific macro strategist at TD Securities.

"In addition, higher income growth provides a valuable offset to declining asset prices - the housing and equity market correction that is currently underway."

With wages still only advancing at a glacial pace, Beacher dropped a previous call for a first rate hike next May and shifted to November instead.