Australia unexpectedly added workers last month, capping the best January-to-May period of hiring in five years and prompting traders to pare bets on interest-rate cuts as the local dollar stages its strongest rally this year.
The number of people employed rose by 38,900 in May, after a revised 7,000 gain in April that was lower than previously reported, the statistics bureau said in Sydney today. The median estimate was for no change in employment in a Bloomberg News survey of 23 economists. The jobless rate rose to 5.1 percent from a revised 5 percent in April as participation increased.
The local currency jumped 2.5 percent this week as the jobs data and a gross domestic product report showing the economy expanded 1.3 percent last quarter, more than twice the level forecast, underscore the nation’s resource-fueled growth. Reserve Bank Governor Glenn Stevens cut interest rates by 75 basis points in the past two meetings, to 3.5 percent, to shore up the economy as the outlook in Europe and China deteriorates.
“Despite the moderate uptick in unemployment, this is a stellar jobs report and paints a very healthy picture of the labor market,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “Coupled with strong first quarter GDP growth, the RBA will likely sit on their hands and keep rates steady for the next couple of months.”
Traders are pricing in a 23 percent chance the central bank will keep rates unchanged next month, up from none before today’s jobs data, according to swaps data compiled by Bloomberg. Prior to yesterday’s GDP report they saw a 50 percent chance of a half-point reduction.
The Australian dollar bought 99.51 U.S. cents at 2:07 p.m. in Sydney compared with 98.92 cents before the data, while the S&P/ASX 200 Index of stocks was 1.4 percent higher.
The number of full-time jobs advanced by 46,100 last month, the biggest increase in almost a year, and part-time employment fell by 7,200, today’s report showed. Australia’s participation rate, a measure of the working-age population, gained to 65.5 percent in May from 65.2 percent a month earlier, it showed. That was the highest since November.
The nation’s economy is being powered by an estimated A$500 billion pipeline of resource projects that is spurring hiring by companies including BHP Billiton Ltd. (BHP) to meet Chinese demand.
Japan’s Cabinet Office may say today its leading economic indicator fell in April, while Taiwan’s exports are forecast to have dropped for a third month in May, according to Bloomberg surveys.
Asian stocks advanced for a third day as oil and copper climbed on speculation policy makers around the world will take steps to revive the slowing economy. The MSCI Asia Pacific Index was 1.5 percent higher at 1:02 p.m. in Tokyo.
The Bank of England will probably keep its benchmark rate at a record-low 0.5 percent and maintain its asset purchase target at 325 billion pounds ($503 billion), Bloomberg surveys showed. A U.K. purchasing managers’ index probably showed the services industry grew the least in six months in May, according to a separate survey. Greece will also release its unemployment rate for March today.
The U.S. Labor Department may say initial jobless claims fell to 378,000 in the week ended June 2 from 383,000 in the previous period, economists surveyed by Bloomberg predicted. The Federal Reserve may report U.S. consumer borrowing rose at a slower pace in April compared with March.
In Australia, Rio Tinto Group said in April that it has begun a four-month recruitment drive to hire 6,000 workers for A$22 billion of projects in Western Australia state, the Northern Territory, Queensland and New South Wales.
Yesterday’s GDP report showed that compared with a year earlier, the economy expanded 4.3 percent in the first quarter, the fastest annual pace since the third quarter of 2007.
Australia has added 123,300 jobs in the first five months of this year, the biggest gain since 132,700 were added from January through May of 2007, according to government statistics compiled by Bloomberg.
Today’s report showed New South Wales, the nation’s most populous state, added 30,300 jobs and Victoria, the center of the nation’s struggling manufacturing industry, 13,500 positions. The unemployment rate in Western Australia, the heart of the mining investment boom, was 3.8 percent last month.
With GDP that’s about one-tenth the size of the U.S., Australia last month added more than half the number of jobs that the world’s largest economy did. Australia’s unemployment rate is less than half the 11 percent level in the euro area.
“Comparing the job market in Australia with markets in Europe or the U.S. is like comparing chalk and cheese,” said Craig James, a senior economist at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “Australia’s job market remains healthy, supporting growth in the broader economy.”
The local dollar, the world’s fifth-most traded currency, has gained about 40 percent against the U.S. dollar since the start of 2009 and reached $1.1081 on July 27, the highest level since it was floated in 1983.
It retreated in recent weeks as signs mount that Europe’s debt crisis will sap global growth. The currency dropped 6.7 percent last month, when the central bank unexpectedly cut its benchmark interest rate by half a percentage point and as data from China, Australia’s biggest trading partner, indicated a slowing economy. The RBA cut rates by another quarter point this week.
Yesterday’s GDP report showed household spending rose 1.6 percent in the first quarter, adding 0.9 percentage point to growth. Non-dwelling construction soared 12.6 percent, adding 1 point to growth, it showed. Exports dropped 1.3 percent, shaving 0.2 point from the expansion.
The GDP report showed new engineering construction soared 19.7 percent in the first quarter from the final three months of last year, and 53 percent from a year earlier as the mining bonanza intensifies. In contrast, housing construction dropped 2.1 percent from the fourth quarter as the industry struggles.
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