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Australia's jobs growth blows past expectations

Key Points
  • A total 39,100 net new jobs were created in January, surpassing market forecasts for a 15,000 increase, according to the Australian Bureau of Statistics (ABS) report.
  • The Australian dollar in response jumped to a two-week top of $0.7208.
People walk past the Myer Christmas window display as they do their shopping on December 20, 2012 in Melbourne, Australia.
Scott Barbour | Getty Images

Australia's jobs growth surged past all expectations in January as firms took on more full-time staff while the jobless rate stayed at its lowest in seven years, upbeat data showed on Thursday, sending the local dollar higher.

A total 39,100 net new jobs were created in January, from a downwardly revised but still sturdy 16,900 in December and surpassing market forecasts for a 15,000 increase, according to the Australian Bureau of Statistics (ABS) report.

The in response jumped to a two-week top of $0.7208.

The barnstorming performance will be welcomed by policymakers who are counting on labour market strength for a long-awaited pick up in wage growth and inflation in the face of a downturn in the property market.

The overall trend in Australia's jobs market has been robust over the past couple of years with annual employment growth of 2.2 percent, faster than the 1.6 percent rise in population.

The unemployment rate stayed at 5.0 percent, the lowest since April 2012. The only factor preventing a further decline in the jobless rate in January was an rise in the participation rate to 65.7 percent. This means the jobless rate remained at its recent low, even with an increase in the number of people looking for work.

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The strength in the labour market helped the underemployment rate decline to 8.1 percent, although it still remains high by historical standards.

The jobs data has become increasingly important recently as Australia's once-booming property market is in a sharp downturn raising fears about a potential economic slowdown. Many analysts expect home values to fall further this year.

Yet, leading indicators of labour demand continue to point to further employment growth in Australia in a positive sign for household spending. An index of vacancies released by the department of jobs and small business last month showed there were 185,547 skilled job vacancies in December, the highest in 6-1/2 years.

That should give the Reserve Bank of Australia's (RBA) confidence that the A$1.8 trillion ($1.3 trillion) economy is on the right track. The RBA has held the cash rate at a record low 1.50 percent for almost 2-1/2 years now.