Australia’s unemployment rate unexpectedly fell in March, sending the Aussie to a 4 1/2 month high as traders added to bets on an interest-rate increase.
The jobless rate declined to 5.8 percent from a revised 6.1 percent, the statistics bureau said in Sydney today. That’s the biggest drop since August 2010 and defied economists’ estimates for unemployment of 6.1 percent. The number of people employed rose by 18,100 after climbing a revised 48,200 a month earlier.
The data and a stronger housing market indicate businesses are beginning to invest in an economy that policy makers predict will accelerate. Traders are pricing in an end to central bank Governor Glenn Stevens’s easing cycle that saw him reduce the benchmark by 2.25 percentage points to a record-low 2.5 percent.
“The economy’s outlook has improved and we’re getting a lift in hiring,” said Kieran Davies, chief economist at Barclays Plc in Sydney. “The possibility of an early turning in the labor market is one reason why the RBA may hike rates this year.”
The Australian dollar rose as high as 94.40 U.S. cents and traded at 94.16 cents at 12:20 p.m. in Sydney, from 93.84 cents before the data were released. Traders see 22 basis points of tightening over the next year, up from 3 basis points of cuts seen March 3, according to a Credit Suisse Group AG index based on swaps data.
The currency pared gains after a report showed exports from China, Australia’s biggest trading partner, fell 6.6 percent in March, compared with economists’ expectations for a 4.8 percent advance. Imports in China fell 11.3 percent versus a 3.9 percent increase seen by analysts.
The number of full-time jobs declined by 22,100 in March, and part-time employment rose by 40,200, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, dropped to 64.7 percent in March from a revised 64.9 percent a month earlier, it showed.
New South Wales, the biggest state, led gains with 16,300, and Queensland, a major tourist destination, added 12,000, today’s report showed. The manufacturing hubs of Victoria and South Australia were the only states to lose jobs.
The unemployment rate in Western Australia, the center of the nation’s resource industry, dropped to 4.9 percent from 5.9 percent, today’s data showed. Unemployment in South Australia climbed to 7.1 percent in March from 6.7 percent, it showed.
Jobs gains shown in last month’s report prompted Bill Evans, an economist at Westpac Banking Corp. who called the past easing cycle, to drop his prediction of further rate cuts.
Stevens said late last month that there are encouraging early signs of a handover from mining-led demand growth to domestic consumption and the nation’s economy may strengthen later this year. Loose monetary policy has boosted household spending and confidence, with Coles supermarkets and Woolworths Ltd. among companies hiring.
House and apartment prices in the largest cities surged 10.6 percent in the year to March 31, led by a 15.6 percent increase in Sydney. Stevens last month said Australia was set to have a “boom” in residential construction.
Data in the past month has been mixed. Home-loan approvals rose a bigger-than-forecast 2.3 percent, and job advertisements and consumer sentiment also edged higher. On the other side, retail sales advanced a less-than-expected 0.2 percent, while business confidence slipped and building approvals dropped in February from the previous month.
“The job market is showing signs of stabilizing with unemployment having peaked or pretty close to it,” said Savanth Sebastian, an economist at a unit of Commonwealth Bank of Australia in Sydney. “The labor market is the lagging indicator in the economy and it is now showing signs of reflecting the recent solid lift in economic activity.”