Australia’s Unemployment Rate Jumps to Three-Year High: EconomyMichael Heath
Australia’s unemployment rate climbed in March to the highest level in more than three years, sending the local dollar and bond yields lower as traders added to bets the central bank will resume interest rate cuts.
The jobless rate rose to 5.6 percent from 5.4 percent, the statistics bureau said in Sydney today, the highest since November 2009. That compares with the median estimate for unemployment to hold steady in a Bloomberg survey of 24 economists. The number of people employed fell by 36,100, almost five times more than economists forecast.
Today’s report adds to challenges for Prime Minister Julia Gillard, whose Labor Party is 10 percentage points behind the opposition in public polls ahead of a Sept. 14 election. With General Motors Co.’s Holden division this week announcing further job-cut plans, the swaps market indicates the Reserve Bank of Australia will lower borrowing costs in August.
“This should reinforce to the policy makers that the labor market still remains soft,” said Joshua Williamson, a senior economist at Citigroup Inc. in Sydney who forecast jobs would fall by 20,000. “This rounds off a week of very soft data for Australia. It suggests that the rebalancing from the mining to non-mining economy will not go particularly smoothly. It reinforces the need for another cut in rates.”
The Australian dollar fell to $1.0507 at 12:55 p.m. in Sydney from $1.0537 before the data were released. Three-year bond yields dropped to 2.81 percent, from 2.88 percent before the jobs report.
Traders priced in a 52 percent chance the RBA will lower the benchmark rate to a record low 2.75 percent in August, according to swaps data compiled by Bloomberg. Earlier in the week, there was a less than 50 percent chance of a reduction in the month.
A Westpac Banking Corp. survey yesterday showed consumer sentiment declined 5.1 percent in April, ending three months of increases, emphasizing “how fragile consumer confidence has become,” said Bill Evans, chief economist at Westpac.
Central bank Governor Glenn Stevens is forecasting a softer labor market and slashed the overnight cash-rate target by 1.75 percentage points in the 14 months through December to 3 percent. Holden said this week it will cut about 500 jobs in Australia, citing the local dollar’s strength, and currency devaluations in competing markets.
Unemployment in the manufacturing hub of Victoria climbed to 5.6 percent in March as the state lost 9,300 jobs, the biggest decline among the states and territories, today’s report showed. The jobless rate in resource-rich Queensland was unchanged and Western Australia, also a key mining state, had a slight increase to 4.7 percent.
The total employment decline was the biggest in 10 years and compared with economists’ forecasts for a 7,500 fall, according to the median of 24 estimates in Bloomberg survey. That followed a 74,000 gain in February that was higher than first reported and the biggest increase since July 2000.
“Last month’s figure was a little higher than we all expected, and this sort of brings it back to reality,” said Hans Kunnen, chief economist in Sydney at St. George Bank Ltd. “Unemployment’s still under 6 percent. We’re better than most places in the world.”
Elsewhere in the Asia-Pacific region today, the Bank of Korea held borrowing costs unchanged for a sixth month, keeping the benchmark seven-day repurchase rate at 2.75 percent. Japan’s machine orders rose in February from the previous month while domestic corporate goods prices fell in March from a year earlier.
U.S. President Barack Obama sent a $3.8 trillion budget to Congress yesterday calling for more tax revenue and slower growth for Social Security benefits in a political gamble intended to revive deficit-reduction talks. A report today will probably show initial jobless claims fell to 360,000 in the week ended April 6 from 385,000 in the previous period, according to a Bloomberg survey.
Germany, France, Sweden and Ireland are due to report inflation figures for last month.
Today’s Australia data showed the number of full-time jobs declined by 7,400 in March, and part-time employment fell by 28,700. The participation rate, a measure of the labor force in proportion to the population, dropped to 65.1 percent in March from 65.3 percent a month earlier, it showed.
Data yesterday showed exports from China, Australia’s biggest trade partner, rose less than forecast in March, fueling concerns about the outlook for trade.
Even so, Stevens said this week that China’s yuan is likely to become Asia’s dominant currency and that the region will increasingly seek to deploy its savings within the region to tap higher returns.
Australian industry has been squeezed by the currency’s record stretch above parity with the U.S. dollar since it was freely floated in 1983 that has made tourism more expensive and exposed local manufacturers to cheaper imports. Rosella, a 117-year-old saucemaker, announced its closure at the start of March, leaving 70 workers without a job.
The cuts illustrate Australia’s lopsided economy, as a mining-investment boom delivers the quickest growth in the developed world even as it masks other weaknesses. The central bank in February lowered its economic growth and inflation forecasts as investment outside the mining industry remains elusive and the strong currency contains prices.
The RBA says there are signs lower rates are gaining traction with households. Retail sales had their biggest back-to-back gain in almost four years over the first two months of 2013, data released last week showed.
“There are signs that the low level of interest rates is having some of the expected effects and these are likely to have further to run,” RBA Assistant Governor Christopher Kent said at the Bloomberg Australia Economic Summit in Sydney yesterday.
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