Australian Unemployment Unexpectedly Falls, Lifting Currency
Australia’s jobless rate unexpectedly declined in August on signs employers in mining states are still hiring workers, boosting the local currency after a three-day slide.
The unemployment rate fell to 5.1 percent from 5.2 percent in July, the statistics bureau said in Sydney today. The median estimate in a Bloomberg News survey of 23 economists was for a rise to 5.3 percent. The participation rate slumped to the lowest level in more than five years, a sign job seekers exited the labor force. The number of people employed dropped by 8,800, compared with economists’ forecast for an increase of 5,000.
The currency advanced as traders reduced bets Reserve Bank of Australia Governor Glenn Stevens will cut interest rates next month from the highest level among major developed nations. While the economy grew about 4 percent in the first half on the strength of resource-industry investment, a stronger currency and slower global growth have led to job reductions at companies including Ford Motor Co. (F) and Qantas Airways Ltd. (QAN)
“The fact that the unemployment rate continues to oscillate within a relatively stable 5-5.25 percent band, with full employment estimated to be a little shy of 5 percent, supports the RBA’s call that policy has been appropriate,” said Jarrod Kerr, director of Australia rates strategy at Credit Suisse Group AG in Singapore. “The report does not have enough meat in it to satisfy the bears.”
The number of full-time jobs advanced by 600 in August, and part-time employment fell by 9,300, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, dropped to 65 percent in August, the lowest level since March 2007, from 65.2 percent a month earlier, it showed.
The Australian dollar snapped three days of declines, buying $1.0232 at 4:08 p.m. in Sydney compared with $1.0180 before the data were released. Traders are pricing in a 54 percent chance the RBA will lower the benchmark rate by a quarter percentage point to 3.25 percent at its Oct. 2 policy meeting, swaps data compiled by Bloomberg show. Yesterday the chance was 71 percent.
Today’s report reflected Australia’s so-called two-speed economy -- a phrase the RBA uses to distinguish resource-rich regions in the north and west that are powering growth and hiring, from struggling tourism, manufacturing and retail industries across the south and east.
Employment dropped by 14,800 in Victoria and 9,000 in the South Australia, states that form the hub of the nation’s manufacturing industry, today’s report showed. It gained by 6,900 in Western Australia and 5,800 in Queensland, which are centers of the resource industry.
Nationwide, the jobless rate has been 5 percent to 5.3 percent for the past 17 months.
“The decline in unemployment suggests that perhaps the labor market isn’t as bad as was anticipated,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “I don’t think this data is going to really change the RBA’s view that they’re going to hold steady for the near term.”
The data followed a drop in Australian help-wanted notices for a fifth straight month in August as business confidence weakened.
Today’s employment report showed aggregate hours worked declined 0.4 percent in August from a month earlier. Kerr of Credit Suisse estimates average weekly hours declined to 32.38 from 32.47.
“This may be taken as a positive in that it implies employers preferred more heads in seats rather than culling headcount,” he said. “But we note the average hours worked per week remains below the post-Lehman average, and well below the pre-Lehman average.”
Mounting signs of a slowdown in China’s economy have spurred a 3.3 percent drop in the Aussie dollar over the past month against its U.S. counterpart, making it the worst performer among major currencies tracked by Bloomberg.
Resource investment to meet Chinese demand and foreign investment funds seeking a haven have spurred gains in the currency, which closed above parity with the U.S. dollar for all but 23 days this year. The Aussie has averaged $1.02 in the past two years, compared with 72 U.S. cents in the prior decade.
Ford’s Australian division said in July it will cut production and slash one in seven jobs after sales of trucks and its flagship Falcon car slumped. Qantas, Australia’s largest airline, said May 21 it will cut 500 jobs and consolidate heavy maintenance in two bases to pare costs as it contends with rising fuel prices and losses on international routes.
The prospects for the country’s job market have grown dimmer in recent weeks as companies scaled back investment plans.
BHP Billiton Ltd. (BHP), the world’s biggest miner, last month decided to delay approval of an estimated $33 billion expansion of the Olympic Dam copper, uranium and gold mine in South Australia. Fortescue Metals Group Ltd. (FMG), Australia’s biggest iron ore producer after Rio Tinto Group and BHP, said this week it’s cutting its full-year capital spending forecast by 26 percent to $4.6 billion.
“The government recognizes that there is ongoing softening in Australian labor market,” Employment Minister Bill Shorten told reporters today in Brisbane, the capital of Queensland state. “We’ve seen an easing in the participation rate. Australia is still doing better in the global rankings than most other countries in the world.”
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