Australian Employment Growth Cools, Pushing Jobless Rate Higher
Australian employment growth slowed in July, driving down the nation’s currency as investors bet the central bank will extend a pause in the most aggressive round of interest-rate increases by a Group of 20 member.
The number of people employed gained 23,500 from June, when it rose a revised 37,400, the statistics bureau said in Sydney today. The jobless rate climbed to 5.3 percent from 5.1 percent as more people entered the labor market.
Australian and Asian stocks dropped today, extending a global rout on concern the world’s economic recovery is faltering. Central bank Governor Glenn Stevens, who boosted borrowing costs six times between October and May, kept rates unchanged for a third month last week, citing “a degree of caution” among households, whose spending accounts for more than half of Australia’s economy.
“Effectively the Reserve Bank lifted rates too far, too fast, robbing the economy of momentum at a time when the U.S. and Europe continued to meander along,” said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney.
“Businesses have become more cautious, cutting work hours and taking on part-time staff in preference to full-time workers. We would expect this mid-cycle slowdown to persist until late” this year, he said.
The Australian dollar fell to as low as 89.18 U.S. cents, its weakest level since July 29, from 89.68 cents just before the report was released. It traded at 89.71 at 3:41 p.m. in Sydney. Australia’s benchmark S&P/ASX 200 index slid for a third day, dropping 1.2 percent to 4,403.7.
The number of full-time jobs declined 4,200 in July and part-time employment advanced 27,700, today’s report showed.
The figures include revisions to population benchmarks that underpin the employment survey to reflect changes made to estimates of net overseas migration. The revisions cover the period from July 2006 to June 2010. The statistics bureau said last month that while the changes will have a “minimal impact” on the jobless rate, they will affect estimates for the number of people employed and unemployed.
The changes mean “the level of employment has been estimated at around 100,000 jobs higher as of June 2010,” said Michael Turner, an analyst at RBC Capital Markets Ltd. in Sydney. “Participation rates have also been revised higher, which allows only very minor revisions to the unemployment rate.”
Other signs of potential weakness for Australia’s economy include recent reports showing growth may be slowing in parts of Asia. Industrial production in China, Australia’s largest trade partner, expanded at the weakest pace in 11 months in July, highlighting the moderation in growth triggered by Chinese government curbs including a 7.5 trillion yuan ($1.1 trillion) lending limit for 2010.
Governor Stevens said Aug. 3 that monetary policy is “appropriate” with inflation “close” to his target range of 2 percent to 3 percent, and the global “outlook remaining somewhat uncertain.”
“I am not expecting labor growth to be significant in the next 12 months,” Terry Davis, chief executive officer of Coca- Cola Amatil Ltd., said in a telephone interview today.
Australia’s biggest soft-drink maker has added as many as 300 jobs to its domestic workforce of between 3,000 and 4,000, with the “vast majority” of the new positions at its Bluetongue beer brand. “At the same time as we increase in one area, we are taking out of other areas.”
Consumer price inflation cooled to the weakest pace in three years last quarter, with the RBA’s measure of so-called underlying inflation, the trimmed mean gauge, gaining 2.7 percent in the second quarter from a year earlier.
Still, demand from China is fueling a resources investment boom in projects such as Chevron Corp.’s A$43 billion ($39 billion) Gorgon LNG venture in Western Australia and worsening a shortage of skilled labor in that state, where the jobless rate was 4.4 percent in July.
Australia’s terms of trade, a measure of income from exports, are “around their peak of two years ago,” and the nation’s economic growth is likely to be “close to trend,” Governor Stevens said last week, after keeping the benchmark lending rate unchanged at 4.5 percent for a third month.
Job advertisements in newspapers and on the Internet climbed 1.3 percent in July, the third month of gains, a report by Australia & New Zealand Banking Group Ltd. showed this week.
Jobs growth is also helping boost consumer confidence, which climbed this month to its highest level since January, according to a Westpac Banking Corp. survey published yesterday.
NBN Co. chief executive Mike Quigley said last month that as many as 425 people will be employed in Melbourne at the company’s headquarters by early next year. The company is building a A$43 billion national broadband network for the government.
Australia’s participation rate, which measures the labor force as a percentage of the population aged over 15, rose to 65.5 percent in July from a revised 65.3 percent, today’s report showed.