Australian jobs suffer biggest drop in 3 years

Australian employment suffered its sharpest fall in three years last month, data showed on Thursday, underlining the need for urgent stimulus to revive economic activity and wages.

The local dollar fell a third of a cent to $0.6806 as the market narrowed the odds on a rate cut from the Reserve Bank of Australia (RBA) in December, though it was still considered an outside chance.

The disappointing report will also pile political pressure on the conservative government of Prime Minister Scott Morrison to launch a fiscal rescue package for the economy.

Morrison has so far resisted all calls for action, in part by citing continued strength of the labor market.

That position will be harder to defend given net new jobs fell 19,000 in October, the largest drop since late 2016. The unemployment rate also nudged up to 5.3%, reversing a promising dip in September.

Analysts polled by Reuters had forecast a gain of 15,000 jobs and an unemployment rate of 5.3%

"Slower employment growth also presents an additional challenge for the RBA's outlook for a recovery in consumer spending," said NAB economist Kaixin Owyong.

"Ideally the government would step in to deliver additional fiscal stimulus, but if this fails to eventuate he RBA could adopt unconventional policy and cut the cash rate to 0.25%." The central bank has already cut rates three times to an historic low of 0.75%, but so far the only impact has been a revival in home price inflation. Financial markets imply around a 24% probability <0#YIB:> of a quarter-point easing at the RBA's next meeting on Dec. 3, rising to 62% for February.

Just last week the RBA threw in the towel on getting wages going, forecasting miserly annual growth of 2.3% right out to 2021. Indeed, data out showed wage growth actually went backward to 2.2% in the September quarter.

Up until now, Australia's problem was not a dearth of hiring. Some 251,800 net new positions were created in the year to October, with the majority full time.