Australian Employers Add Fewest Jobs in Six Months (Update2)

March 11 (Bloomberg) -- Australian employers added the fewest jobs in six months in February, suggesting the central bank has room to slow the pace of future interest-rate increases.

The number of people employed rose 400 from January after jumping a revised 56,500 in the previous month. That was less than the median estimate of a 15,000 gain in a Bloomberg News survey of 25 economists. The joblessrate increased to 5.3 percent from a revised 5.2 percent.

The pause in the strongest employment boom in more than three years may prompt some consumers to trim spending in coming months. Reserve Bank of Australia Governor Glenn Stevens last week raised borrowing costs by a quarter point to 4 percent for the fourth time in five meetings, and signaled further moves as economic growth accelerates.

“This says there are more interest-rate increases coming, but the central bank doesn’t have to rush,” said Rob Henderson, chief markets economist at National Australia Bank Ltd. in Sydney. “We expect ongoing steady declines in the unemployment rate from here” to 4.7 percent by the end of the year, he said.

The Australian dollar fell to 91.27 U.S. cents at 12:01 p.m. in Sydney from 91.45 cents just before the report was released. The two-year government bond yield dropped 1 basis point to 4.82 percent. A basis point is 0.01 percentage point. The benchmark Australian S&P/ASX 200 index declined to 4819.3 from 4837.2.

Next Move

The number of full-time jobs increased 11,400 in February. That was the sixth straight monthly increase, the longest run of gains since 2006. Part-time employment decreased 11,000.

Today’s report showed hours worked jumped 2.4 percent in February, the biggest monthly increase in over two decades.

“Last year employers were cutting back hours and wages,” said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney. “Now it would seem that workers are getting their hours back.”

“Australia clearly has the strongest economy in the developed world,” he added.

Gross domestic product rose last quarter at the fastest pace in almost two years, climbing 0.9 percent from the three months through September as companies increased investment. Growth is also being stoked by Prime Minister Kevin Rudd’s decision to spend A$22 billion ($20 billion) on roads, railways and schools.

Group of 20

Stevens is the first Group of 20 central banker to raise borrowing costs in 2010 after leading the world in boosting benchmark rates three times last quarter amid mounting evidence Australia’s economy will strengthen after skirting the global recession in 2009.

The moves have taken the Reserve Bank’s overnight cash rate target to 4 percent from a half-century low of 3 percent at the start of October.

Investors are betting there is a 20 percent chance of a quarter-percentage point increase in the overnight cash rate target to 4.25 on April 6, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 11:58 a.m. Prior to today’s report, the chance of such a move was 26 percent.

“Australia starts the current expansion with considerably less spare capacity than earlier thought likely, and with less than at the starting point of previous expansions,” central bank Assistant Governor Philip Lowe said yesterday.

Australian advertisements for job vacancies jumped 19.1 percent in February, the most in a decade, while consumer and business confidence advanced, reports showed this week.

Mining Boom

Increased spending on projects such as the Chevron Corp.- led A$43 billion Gorgon gas venture in Western Australia is worsening a skills shortage. Construction on the project began this year and will generate up to 10,000 jobs.

Marius Kloppers, chief executive officer of BHP Billiton Ltd., the world’s biggest mining company, said on Feb. 10 that the skills shortage in Australia’s resources industry is emerging faster than expected.

More than A$100 billion of resources projects in Western Australia are likely to generate about 40,000 construction jobs and 12,500 permanent positions, a state government report released last year shows.

“It’s clear that employment should continue to rise at a healthy pace over the remainder of 2010,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. “The RBA will be aware that once the unemployment rate dips below 5 percent, wages pressures generally will start to intensify.”

In contrast, the unemployment rate in the U.S. was 9.7 percent in February, and 9.9 percent in January among European Union countries.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net