Australian Jobs Drop in Blow for Rudd’s Re-Election Bid: EconomyMichael Heath
Australian employers unexpectedly cut payrolls in July and unemployment held at an almost four-year high, denting Prime Minister Kevin Rudd’s bid for a come-from-behind election win.
The number of people employed fell 10,200, the statistics bureau said in Sydney today. That compares with the median estimate for a 5,000 rise in a survey of 24 economists. The jobless rate held at 5.7 percent as fewer people sought work.
The data underscore the challenge for Rudd as he pitches for another term based on economic management ahead of the Sept. 7 election. Central bank Governor Glenn Stevens is forecasting a softer labor market and below-trend growth and has reduced the overnight cash-rate target by 2.25 percentage points since late 2011, including a quarter-point cut this month to a record-low 2.5 percent as a resource-investment boom wanes.
While the jobless rate didn’t rise, “the government shouldn’t be crowing too loudly because that was a result of less people looking for work,” said Joshua Williamson, a senior economist at Citigroup Inc. in Sydney. “The result is not cataclysmic, but it certainly suggests this is a slowing economy.”
The Australian dollar dropped after the report, before recovering to trade at 90.55 U.S. cents at 2 p.m. in Sydney after China’s exports and imports rebounded in July. Traders are pricing in a 78 percent chance the RBA will hold interest rates unchanged next month, according to swaps data compiled by Bloomberg.
The number of full-time jobs declined by 6,700 in July, and part-time employment fell by 3,500, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, dropped to 65.1 percent in July from 65.3 percent a month earlier, it showed.
Industry has been squeezed by a currency that held above $1 from mid-June last year to May 9, the longest stretch above parity with the U.S. dollar since the Aussie was freely floated in 1983. While the local dollar has declined 12 percent in the past three months, the worst performer among group of 10 currencies, it hasn’t assisted the nation’s manufacturers.
A private gauge released Aug. 1 showed manufacturing slumped 7.6 points to 42 last month, the biggest decline since April. Fifty is the dividing line between growth and contraction.
Ford Motor Co. announced May 23 it would end production in the country after nine decades, with the loss of 1,200 jobs. General Motors Co.’s Holden division said in April it will cut about 500 jobs in Australia, citing the currency’s strength.
Job advertisements fell 1.1 percent in July, the fifth straight monthly drop, Australia & New Zealand Banking Group Ltd. said in an Aug. 6 report. The unemployment rate was 10 percent or higher in more than 140 of Australia’s 1,400 regions in the three months through March, according to government data released in July. More than 64 percent of regions recorded a higher jobless rate over the 12 months through March, it showed.
Stevens, in his statement accompanying the Aug. 6 decision to lower rates, said: “in Australia, the economy has been growing a bit below trend over the past year. This is expected to continue in the near term as the economy adjusts to lower levels of mining investment. The unemployment rate has edged higher.”
China’s exports and imports exceeded economists’ estimates, adding to signs Australia’s biggest trading partner is stabilizing following a two-quarter slowdown. Elsewhere, the Bank of Korea held its benchmark interest rate steady at 2.5 percent today, as predicted by all 16 economists surveyed.
In Europe, Germany will report trade data for June and Greece unemployment figures for May. In the U.S., claims for jobless benefits probably rose by 9,000 to 335,000 in the week ending Aug. 3, economists predicted before a Labor Department report in Washington.
Australia’s Rudd is framing the vote as a battle between David Cameron-style austerity from the opposition and his own program that allows the deficit to widen as it prioritizes jobs. Labor trailed the opposition by 4 percentage points on a two-party preferred basis in a Newspoll published Aug. 5.
The government on Aug. 2 cut its growth estimate for this fiscal year to 2.5 percent and said the unemployment rate will rise to 6.25 percent by the middle of 2014.
Most jobs were lost in manufacturing and financial services states of New South Wales, Victoria and South Australia, with a total decline of 34,800, today’s report showed. Queensland gained 18,400 positions.
Since Labor won office in November 2007 through May this year, a net 962,800 jobs have been created, according to data compiled by Bloomberg from labor force figures. While the resources-investment boom has powered economic growth, the 122,300 mining jobs created is less than half the 303,500 in healthcare and social assistance roles. The manufacturing industry has lost 112,400 workers over the period.
Under the 11 1/2 years of Coalition rule from March 1996 to November 2007, 2.4 million jobs were created. The biggest category over that period was construction, with 359,240 jobs.
“The challenge for Australia right now is to create jobs and give people job security,” Shadow Treasurer Joe Hockey told reporters in Sydney today.
Opposition leader Tony Abbott yesterday vowed to trim company taxes by 1.5 percentage points in his first major campaign promise, saying it will “be good for jobs.”
“The election has become about who will better guide the economy as it transitions away from mining investment-led growth,” Katrina Ell, an economist at Moody’s Analytics in Sydney, said before the report. “Employment isn’t helping the government’s already difficult task of winning over voters.”