Australia Adds Workers in May as Rate-Cut Bet Deferred: EconomyMichael Heath
Australia unexpectedly boosted payrolls in May and unemployment declined as the job market withstood a weaker domestic outlook, prompting traders to push back interest-rate cut bets.
The number of people employed rose by 1,100, the statistics bureau said in Sydney, after rising a revised 45,000 in April. May’s increase compares with the median estimate for a 10,000 drop in a Bloomberg survey of 25 economists. The jobless rate fell to 5.5 percent from a revised 5.6 percent.
The data underscore the resilience of the world’s 12th-largest economy, which has been driven by investment in resources to meet Chinese demand. Reserve Bank of Australia Governor Glenn Stevens cut rates by 2 percentage points in the past 20 months, including a quarter-point reduction in May to a record-low 2.75 percent, as he seeks to revive industries outside mining, where investment is predicted to peak this year.
The “jobs data was undeniably better than feared,” said Scott Haslem, Sydney-based chief economist for Australia at UBS AG, who also noted a swing to part-time over full-time jobs that indicates underlying weakness. The unemployment rate “is no smoking gun for the RBA in July and we keep our 25 basis point call for a cut in August.”
The Australian dollar traded at 94.60 U.S. cents at 4:06 p.m. in Sydney, compared with 94.42 before the data’s release. Traders are pricing in a 37 percent chance the central bank will next month lower rates by a quarter-point to a new record low 2.5 percent, down from 47 percent before the report.
The number of full-time jobs declined by 5,300 in May, and part-time employment rose by 6,400, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, dropped to 65.2 percent in May from 65.3 percent a month earlier, it showed.
“We’ve come down a tick this month, but broadly we suspect the trend is toward a higher unemployment rate,” said Michael Turner, a debt strategist at Royal Bank of Canada in Sydney.
Industry has been squeezed by a currency that held above $1 from mid-June last year to May 10, the longest stretch above parity with the U.S. dollar since the Aussie was freely floated in 1983, boosted by resource investment in the nation’s north and west.
Australia’s industrial heartland of Victoria added 11,400 workers, while Queensland employment rose 2,400, the data show.
In Asia, equities dropped today, with the region’s benchmark index headed toward a correction, and the yen rose to the strongest in two months against the dollar after the World Bank cut its global growth forecast amid concern central banks may pare monetary stimulus.
The MSCI Asia Pacific Index tumbled 2.6 percent, erasing this year’s gains. The yen gained at least 1.4 percent against its 16 major peers, reaching 93.95 per dollar, the strongest since April. The global economy will expand 2.2 percent in 2013, the World Bank said yesterday, paring a January forecast of 2.4 percent.
New Zealand and South Korea held rates today, while Indonesia unexpectedly raised its reference rate to 6 percent from 5.75 percent.
New Zealand central bank Governor Graeme Wheeler said his currency “remains overvalued and continues to be a headwind” for industries that compete with imports. Wheeler cut his growth forecast for the year through March 2014 to 3 percent from 3.3 percent and reiterated that he will seek to intervene in the foreign-exchange market where appropriate.
In Europe, Ireland, Poland and Russia are scheduled to report inflation data. In the U.S., weekly jobless claims were probably unchanged at 346,000 for the week ending June 8, economists forecast ahead of a report due today.
In Australia, hiring has been spurred by energy companies from Chevron Corp. to ConocoPhillips that are building seven liquefied natural gas projects in Australia at a cost of almost $200 billion. BG Group Plc, Santos Ltd. and a ConocoPhillips and Origin Energy Ltd. venture are developing three of them on Queensland state’s Curtis Island.
More than 7,000 people are working on Santos’s $18.5 billion Gladstone LNG project in Queensland, Chief Executive Officer David Knox said in a May 9 speech. BG Group’s Australian unit said in a May 24 statement it has been hiring more than 15 people a day for six months and 11,600 people are working with the company and its major contractors.
Stevens said in a June 4 statement after keeping the key rate unchanged that the RBA still has room to cut and judged that the nation’s exchange rate remains high.