Australian Job Market’s Worst Year Since ’92 Boosts Rate-Cut Bets: Economy
Australia unexpectedly lost jobs for a second straight month in December, capping the nation’s worst year for employment in almost two decades and weakening the local currency as traders raised bets on interest-rate cuts.
Falling part-time employment stalled job growth last year, with total payrolls posting little change in the year through December, its worst annual performance since 1992. The unemployment rate held at 5.2 percent for a second straight month in December as full- and part-time positions combined posted the biggest drop since April.
“Domestic business conditions are tough,” said Savanth Sebastian, an economist at Commonwealth Bank of Australia, the nation’s largest lender. “Over the next few months, the ongoing uncertainty about the global environment is likely to ensure businesses remain cautious and as such hiring intentions will continue to be scaled back.”
Traders priced in an 88 percent chance Reserve Bank of Australia Governor Glenn Stevens next month will make a third consecutive rate reduction for the first time since 2008 as Europe’s sovereign-debt crisis weakens global trade and growth. Signs of weakening demand are emerging across the Asia-Pacific region, with New Zealand today recording an unexpected decline in consumer prices.
New Zealand consumer prices dropped 0.3 percent from the third quarter, when they advanced 0.4 percent, government data showed, giving the central bank scope to hold rates at a record- low. A separate report showed consumer confidence rose this month from December, with the index reading at the highest in a year.
Asian stocks rose today, spurring a record start to the year for the MSCI Asia Pacific Index (MXAP), and South Korea’s won strengthened amid signs China will relax credit controls. The MSCI gauge advanced 0.8 percent as of 1:34 p.m. in Tokyo, poised for the highest close since Nov. 9.
The Philippine central bank may cut rates today for the first time since July 2009. Bangko Sentral ng Pilipinas will reduce the rate it pays lenders for overnight deposits by a quarter of a percentage point to 4.25 percent, according to 13 of 17 economists surveyed by Bloomberg. The rest expect the benchmark to be left unchanged at 4.5 percent.
The Conference Board’s China leading economic index, which captures prospects for the next six months, rose the most in three months in December, adding to signs the slowdown in the nation’s growth is stabilizing as the government eases monetary policy.
Australian data showed the number of people employed fell by 29,300 last month after a revised 7,500 drop in November, exceeding the median estimate in a Bloomberg News survey of 23 economists for a 10,000 increase.
The number of full-time jobs advanced by 24,500 in December, and part-time employment plunged by 53,700, today’s report showed. The participation rate, a measure of the working- age population, dropped to 65.2 percent in December, the lowest level since May 2010, from 65.5 percent a month earlier.
Australia’s dollar weakened, trading at $1.0393 at 3:34 p.m. in Sydney from $1.0423 before the release and $1.0437 yesterday in New York. Investors are pricing in 107 basis points of rate cuts over the next 12 months, up from 103 points, a Credit Suisse Group AG Index showed.
Leading indicators of Australian employment have been weaker as pessimism about the global economic outlook deepens.
A closely watched government measure of job vacancies dropped 3.3 percent in the three months to November, retracing all of the gains in the prior period.
Help-wanted notices fell in December for the fifth time in six months as the bout of global financial turmoil worsened, an Australia & New Zealand Banking Group Ltd. report released three days ago showed.
UBS AG analysts said in a Jan. 13 report that Australian banks may scrap 7,000 jobs in the next two years as the nation’s lenders cut costs that account for 58 percent of expenses to offset the weakest credit growth since World War II.
The focus on employment costs at banks, which are among major employers in the biggest cities of Sydney and Melbourne, mirror the challenge faced around the world by lenders battling slower revenue growth amid weak household and business confidence. ANZ Bank, the third biggest in Australia by market value, is preparing to cut as many as 900 jobs in coming months, the union that represents bank workers said last week.
The World Bank this week lowered its global growth forecast by the most in three years, saying that a recession in the euro region threatens to exacerbate a slowdown in emerging markets such as India and Mexico.
The global economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, the Washington-based institution said. The euro area may contract 0.3 percent, compared with a previous estimate of a 1.8 percent gain.
Austria, Portugal and Poland will release producer prices data today, while Ireland may say consumer prices based on a harmonized European Union measure rose 1.3 percent in December from a year earlier, according to the median estimate of economists surveyed by Bloomberg. The European Central Bank will also release its monthly bulletin today.
U.S. consumer prices rose 0.1 percent after holding steady in November, according to the median forecast of 78 economists surveyed by Bloomberg before Labor Department data today. The Federal Reserve Bank of Philadelphia may say manufacturing in the Philadelphia region picked up in January.
Other reports may also show U.S. homebuilding is still lagging. Builders probably broke ground on fewer homes in December, and permits, a sign of future construction, were probably little changed, according to the Bloomberg survey median ahead of Commerce Department data.
Australia’s central bank reduced its overnight cash rate target to 4.25 percent from 4.5 percent on Dec. 6, with Stevens citing “considerable turbulence” in financial markets and an increased chance of a “further material slowing in global growth.” The RBA’s holds its next policy meeting Feb. 7.
“The fact that the unemployment rate is still broadly steady tells you that we’re still in reasonable shape,” said Paul Bloxham, chief economist for HSBC Holdings Plc in Sydney and a former central bank official. “This is consistent with the idea that the RBA will be cutting rates next.”
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