Australia Employment Rises, Keeps Jobless Rate Steady

Opera House in Sydney, Australia.
Ken Ross | Taxi | Getty Images
Opera House in Sydney, Australia.

Australian employment rose by more than expected in January to help hold the jobless rate steady at 5.4 percent, a modestly encouraging report that offset a recent run of softer news on the economy.

Thursday's figures from the Australian Bureau of Statistics showed 10,400 jobs were created in January after a loss of 3,800 in December. That topped forecasts of a 5,000 rise, while the unemployment rate undershot expectations of 5.5 percent.

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The details were not so strong, however, with full-time employment dropping 9,800 and the participation rate slipping to a three-month low at 65.0.

Analysts still suspect the jobless rate will continue to creep higher given sluggish domestic demand and the competitive pressures of a historically high currency.

"The headline numbers weren't too bad, but we would argue that the underlying details are rather soft," said Su-Lin Ong, a senior economist at RBC Capital Markets.

"The numbers are probably consistent with the Reserve Bank's view that the labor market will deteriorate further, though at face value the pace of deterioration is not all that significant. It's consistent with their bias to ease but possibly waiting for some more data and not a huge urgency."

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After cutting rates in October and December, the Reserve Bank of Australia (RBA) held steady at 3 percent this week, citing signs past cuts were slowly working their magic on the economy.

Investors still expect at least one more easing.

Interbank futures imply a 50-50 chance of a cut at the RBA's next policy meeting in March, while swap rates show some risk of an eventual move to 2.5 percent.

The RBA has forecast that unemployment would only rise "a little further" in coming months. Many analysts see a risk it could increase steadily toward 6 percent as a boom in mining investment begins to plateau later this year.

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Annual growth in employment was a pedestrian 0.9 percent in January, well below the historical trend of around 1.6 percent.

The biggest drag on jobs last year came from the public sector amid spending cuts at both the state and Federal levels.

The building industry also suffered from a moribund housing market, though home prices have shown some life in the last couple of months. The RBA is hoping that lower rates will fuel a revival in home construction this year, and help plug any gap left when mining investment starts to slow.

In contrast, healthcare had a strong year in 2012 and, with 1.37 million workers, is the single biggest employer. The sector is expected to grow as Australia's population ages.

The professional and scientific sector also did well last year, as did education and mining.