Australian unemployment spikes to 6 percent
Australia's unemployment rate unexpectedly climbed in January as full-time employment slumped by the most since 2013, reflecting waning stimulus from record-low interest rates and a weaker currency. The local dollar fell about one-third of a U.S. cent. Jobless rate rose to 6% from 5.8%; economists predicted 5.8%. Employment fell 7,900 from December; economists forecast 13,000 gain. Full-time jobs dropped 40,600; part-time employment gained 32,700
Participation rate, a measure of labor force in proportion to the population, was unchanged at 65.2%, matching economists' forecasts. Employment has fallen after record- ing the biggest quarterly gain on record at the end of 2015. That surge drew renewed skepticism about the accuracy of labor force data, which the Australian Bureau of Statistics has acknowledged in the past.
The figures are "probably just a continuation of the data moving back to reality after the unbelievable strength late last year rather than a sign that the concerns over the global economy are giving Australian employers the jitters," said Paul Dales, chief economist for Australia and New Zealand at Capital Economics. "A renewed and sustained deterioration in labor market conditions would bring rate cuts back onto the table."
Australian policy makers have paused rates at a record-low 2 percent for the past nine months as they allowed stimulus from prior easing to work through the economy. The Reserve Bank of Australia enjoyed some luck in 2015 with services industries including education and tourism boosting hiring as firms capitalized on the weaker currency, even as economic growth remained below its 30-year average.
Australia, the most Chinadependent economy in the developed world, is grappling with fallout from plunging prices of its key commodity exports and an unwinding of resource investment. Market wobbles in China have seen the sharemarket in the world's second-largest economy tumble, capital flee at a record pace and the slowest expansion last quarter since 2009, all leaving the economy Down Under vulnerable.
Today's report showed New South Wales and Victoria, the east coast states that have led the economy with housing construction booms, recorded the biggest job losses in January with 13,400 and 9,000 respectively. New South Wales's unemployment rate climbed to 5.5 percent from 5.2 percent and Victoria's to 6.3 percent from 6 percent.
Queensland, which has a substantial resource industry where investment is unwinding and commodity prices falling, recorded a jump in joblessness to 6.4 percent from 5.9 percent. The local dollar traded at 71.60 U.S. cents at 4:40 p.m. in Sydney, from 71.77 cents before the data was released. Traders are pricing in about a 50 percent chance the RBA will cut rates in May.
Reflecting the end of the resource construction boom and lower commodity prices, Australian steel and iron ore producer Arrium Ltd. said Wednesday it had cut 300 jobs. "The RBA has placed a great deal of emphasis on, and taken a lot of comfort from, the improvement in labor market conditions," said Justin Fabo, senior economist at Australia & New Zealand Banking Group Ltd. "The bank is unlikely to be surprised by the pullback in the jobs figures given the previous super strength and questions surrounding data quality, so more data will be needed to get a clearer picture."