Australian employers unexpectedly cut workers for a second month in August, sending the nation’s currency and bond yields lower as investors added to bets the central bank will reduce interest rates.
The number of people employed fell by 9,700, after a revised 4,100 drop in July, the statistics bureau said in Sydney today. That compares with economists’ median estimate for a gain of 10,000 workers. The jobless rate rose to 5.3 percent, the highest since October, from 5.1 percent.
The currency headed for its first weekly decline in a month and bond yields their first weekly fall in three as traders raised bets Reserve Bank Governor Glenn Stevens will lower borrowing costs to help spur hiring. BlueScope Steel Ltd. (BSL), Qantas Airways Ltd. and Westpac Banking Corp. (WBC) announced plans last month to trim workforces, and Stevens signaled yesterday he is willing to extend a pause in rates as a rout in international financial markets threatens the economy.
Concern about global growth weighed on business sentiment and “we should be expecting further contractions in employment over the next few months,” said Helen Kevans, an economist in Sydney at JPMorgan Chase & Co. (JPM), whose firm was alone among the 24 survey respondents to predict a drop. The RBA is “very happy to sit on the sidelines.”
The Australian dollar fell after the report, trading at $1.0591 at 4:16 p.m. in Sydney from $1.0640 before the data. Two-year bond yields declined 11 basis points to 3.65 percent.
Traders are betting Stevens will need to lower borrowing costs by almost 75 basis points by December, interbank cash-rate futures show.
The number of full-time jobs declined by 12,600 in August, and part-time employment rose by 2,900, today’s report showed. Australia’s participation rate, which measures the labor force as a percentage of the population over 15 years old, held at 65.6 percent in August, it showed.
The total number of unemployed Australians rose for a fourth straight month, the longest advance since March 2009, when the global economy was falling into a recession and Stevens was slashing the nation’s benchmark rate to a half-century low of 3 percent. The jobless ranks swelled to 636,800, the highest since October, according to today’s report.
The number of unemployed Australia men gained by 22,200 from a month earlier to 346,200, a 6.9 percent increase that was the biggest since May 2009, the report showed. The number of jobless women declined by 3,700 to 290,600, it showed.
While the jobs report spanned a period when Australia conducted a census, that didn’t have an impact on the main numbers, Kevans said. “Obviously, that employed a lot of temporary workers that may or may not have been picked up in the labor force survey so the impact of that is quite negligible,” she said.
Retailers and factories are getting hurt by a 15 percent gain in the currency in the past year that cuts export income and the developed world’s highest borrowing costs, which Stevens left unchanged at 4.75 percent this week.
BlueScope Steel last month said it will cut about 1,000 jobs because of a second-half loss due to high raw-material costs and the currency.
Clouding Australia’s outlook is concern the world’s largest economy is slowing. Employment in the U.S. unexpectedly stagnated in August as employers became less confident in the strength of the recovery, and the jobless rate held at 9.1 percent, according to a Sept. 2 report.
“Periods of sudden increases in anxiety within international financial markets are moments when, if at all possible, it is good to be in a position to be able to maintain steady settings,” Stevens said in a speech yesterday in Perth. “It is too soon to see much evidence of a concrete impact of these events on the global economy.”
Australia’s economy is being driven by a resource bonanza as China and India, two countries that account for more than a third of the world’s population, increase demand for minerals and energy. The nation’s economy expanded 1.2 percent in the three months through June, the fastest pace in four years, as growth rebounded from floods in the first quarter, a government report showed yesterday.
Two coal-seam gas projects, expected to cost more than A$30 billion, are proceeding near the Queensland port of Gladstone. Santos Ltd. (STO), Australia’s third-largest oil producer, and BG Group Plc, the U.K.’s third-biggest gas producer, will start hiring the first of more than 10,000 construction workers needed for the two projects this year.
The RBA increased rates by 175 basis points from October 2009 through November 2010. In contrast, the U.S. Federal Reserve has held its benchmark rate near zero since December 2008. That divergence contributed to a rise in the local dollar, which reached $1.1081 on July 27, the highest level since it was freely floated in 1983.
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