Australian employers unexpectedly cut payrolls in February and the unemployment rate rose for the first time since August as a stronger currency hurt tourism and manufacturing. The local dollar weakened.
The number of people employed fell by 15,400, the statistics bureau said in Sydney today. That compares with the median estimate for an increase of 5,000 in a Bloomberg News survey of 24 economists. The jobless rate rose to 5.2 percent from 5.1 percent.
The local dollar dropped and bonds gained as the data intensify pressure on the Reserve Bank of Australia Governor Glenn Stevens to end a two-month pause in cutting interest rates after the economy slowed last quarter. Toyota Motor Corp. and General Motors Co. have slashed jobs in Australia this year, citing the strength of a currency fueled by a mining-investment bonanza, while banks fired employees as credit growth weakened.
“The labor statistics are suggesting that the economy is tracking a bit below trend which should leave the door open for the RBA to consider further rate cuts,” said Paul Bloxham, chief economist for HSBC Holdings Plc in Sydney and a former RBA official who predicted 10,000 jobs would be lost. “Their next move will be a cut in the second-quarter of this year.”
The number of full-time jobs was steady in February, with part-time employment accounting for the monthly loss, today’s report showed. Australia’s participation rate, a measure of the working-age population, dropped to 65.2 percent in February from 65.3 percent a month earlier, it showed.
The Australian dollar fell to $1.0558 at 12:18 p.m. in Sydney, from $1.0572 before the data were released. Bonds advanced, with yields on 10-year government debt dropping to as low as 3.91 percent, five basis points below yesterday’s close.
Australia’s economy is driven by a mining boom predicted to last decades as the urbanization of hundreds of millions of people in China and India increases demand for iron ore, coal and liquefied natural gas. In contrast, construction and manufacturing have weakened on signs parts of the economy are buckling and shedding jobs under pressure from the currency.
RBA Deputy Governor Philip Lowe said this week that the labor market is one of the key indicators the central bank is monitoring on how the economy is managing the “historically unusual” structural change.
“It’s hard to be confident how they’re going to work out,” he said in response to questions after a speech yesterday. “The labor market is one place that’s going to tell us the answer.”
Queensland state, the hub of the nation’s tourism industry, led last month’s employment decline with 17,900 job losses, the state’s worst result ever. Queensland’s jobless rate jumped to 5.7 percent last month from 5.4 percent, today’s report showed.
“The high dollar has contributed to a decline in travel to the traditional domestic holiday destinations, with Australians traveling overseas in ever-increasing numbers,” Lowe said. “This has created quite difficult conditions for parts of the industry with, for example, room occupancy rates along the Queensland coast having fallen over recent years.”
The southern states of Victoria and South Australia, centers of the nation’s manufacturing industry, lost a combined 16,400 in February, the report showed. Gains were led by Western Australia, the center of the investment boom, with the state adding 3,400 jobs.
The Australian dollar has gained about 3.5 percent this year against its U.S. counterpart as the highest borrowing costs among major developed nations attract investors. Stevens’s second straight rate pause at 4.25 percent this week reflects confidence the U.S. economy will maintain momentum and A$456 billion ($481 billion) of resource projects will spur hiring to meet Chinese demand.
The nation’s services industry declined in February to the lowest level in almost a year, driven by a drop in new orders as the gap between resources and other industries widens, a private survey showed March 5.
Australia’s economy expanded at half the pace economists forecast last quarter as a housing slump deterred consumer spending, a government report showed yesterday. Gross domestic product advanced 0.4 percent in the fourth quarter from the previous three months. The result was less than economists’ estimates for a 0.8 percent gain.
Australian business profits unexpectedly dropped in the three months through December by the most in two-and-a-half years as earnings weakened at mining and financial companies, reflecting weaker commodity prices and the weakest demand for home lending since 1977.
BHP Billiton Ltd., the world’s biggest mining company, reported a 5.5 percent drop in first-half profit, the first decline since 2009, as rising costs and lower output and prices halved base metals earnings. Net income was $9.9 billion in the six months ended Dec. 31, from $10.5 billion, a year earlier, the Melbourne-based company said Feb. 8.
Westpac Banking Corp., Australia’s second-largest bank, reported first-quarter profit that was lower than a year earlier as rising funding costs squeezed the profitability of its lending. Unaudited cash earnings in the three months ended Dec. 31 were A$1.5 billion, the Sydney-based bank said Feb. 16. It posted cash earnings of A$1.55 billion a year earlier.