Australian employment rose by more than expected in July, driven by a surprise surge in full-time positions which, while not barring an early easing in interest rates, tempered speculation about a series of aggressive cuts.
CNBC.com
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Thursday's labour report showed employers hired a net 10,900 more workers in July, topping expectations of a marginal 1,250 rise, while the unemployment rate stayed steady at 4.3 percent.
The real surprise was a huge 53,700 increase in full-time employment, a sign of resilience given such jobs tend to pay more and offer better security than part-time work.
"It's much stronger than expected, particularly full-time employment," said Stephen Halmarick, co-head of economics for Citi. "Employment is a lagging indicator, but it does remind us that, while some parts of the Australian economy are slowing, other parts are still likely to be quite robust."
Yet he still expected the Reserve Bank of Australia (RBA) to cut its 7.25 percent cash rate in November, given broad signs of weakness in domestic demand and lending.
Earlier this week, RBA governor Glenn Stevens said there was growing scope for an easing given that financial conditions had tightened further amid the global credit squeeze.
The market continued to price in a quarter-percentage point cut as early as September, though the chance of a half-point move was scaled back.
"There's a lot of statistical noise in this series and, overall, employment growth is still in a very gradual downturn," said Brian Redican, a senior economist at Macquarie.
"Crucially, the outlook for the second half of the year is for weaker employment. This result shouldn't rattle the RBA, we still expect them to cut rates in September," he added.
Statistical Lottery
Analysts cautioned that changes to the data had made it even less reliable. Due to budget cuts, the Australian Bureau of Statistics reduced the labour force survey sample by 24 percent in July, increasing the standard error and making the series more volatile.
"This series was always something of a lottery but now it's become a random number generator," complained Tony Meer, chief economist at Deutsche Bank.
As a result he expected the RBA to disregard the series and instead rely on a range of other indicators, like job advertisements, that are pointing to a steady moderation in the demand for labour.
Likewise, a private survey of Australia's construction sector out on Thursday showed activity contracted for a fifth straight month in July, hitting employment in what had been one of the labour market's strongest sectors.
The Australian Industry Group/Housing Industry Association performance of construction index stood at 41.6 in July, far below the key 50.0 level separating expansion from contraction.
And its employment index dropped to 43.2, the fourth straight month of contraction, as dire weakness in home building offset strength in engineering projects like road and rail.
Still, economists emphasised that the slowdown in employment growth was still moderate and there was no sign of the mass layoffs hitting the United States.
The country's biggest online job service, SEEK, currently shows 211,000 vacancies, including 13,000 in construction.
The latest NAB survey of Australian businesses found that 64 percent of firms were still complaining of a lack of suitable workers. That led economists to suspect firms would be in no hurry to lay off labour, even if they cut back on hiring.