Australian Jobless Rate Jumps to 6.4% in January

Morning commuters cross a road as trams travel past the Flinders Street Station building, left, in Melbourne. The jobless rate rose to 6.4 percent from 6.1 percent, the statistics bureau said in Sydney today. Photographer: Carla Gottgens/Bloomberg

Australian unemployment climbed to a 12 1/2-year high, sending the currency lower and underscoring last week’s decision to cut interest rates to a fresh record low.

The jobless rate rose to 6.4 percent from 6.1 percent, the statistics bureau said in Sydney today. That was the worst since August 2002 and exceeded the median estimate of 6.2 percent from a survey of 27 economists. The number of people employed fell by 12,200, led by declines in eastern states.

The Reserve Bank of Australia unexpectedly ended a 17-month pause and cut rates this month to support an economy that’s on track to expand below its potential for six of the past seven years. Its efforts to revive business confidence and encourage investment and hiring outside the mining industry have been hampered by renewed government infighting.

“It probably means that there’s more rate cuts to come,” said Stephen Walters, Sydney-based chief economist at JPMorgan Chase & Co. Given volatility in Australia’s labor data in the past 12 months, “just look at the jobless rate, rather than those bounces in employment. That’s still going up.”

The Australian dollar fell to 76.50 U.S. cents at 12:48 p.m. in Sydney, from 77.21 cents before the data was released. Traders see a 67 percent chance that the RBA will cut its benchmark in March, according to swap market prices, up from 34 percent at the start of the week.

Large swings in Australia’s monthly jobs numbers over the past 12 months prompted skepticism among some analysts and led the country’s statistician to review the data agency’s calculation methods in October.

Full-Timers Fall

“The reliability of the January survey is questionable,” said Katrina Ell, an economist at Moody’s Analytics in Sydney.

The number of full-time jobs dropped by 28,100 in January, and part-time employment rose by 15,900, today’s report showed.

Australia’s participation rate, a measure of the labor force in proportion to the population, was unchanged at 64.8 percent in January, it showed.

New South Wales led job losses with a 14,500 decline in January, followed by Queensland with a 7,100 cut and Victoria with a drop of 6,300, it showed.

“Overall, the bank’s assessment is that output growth will probably remain a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected,” RBA Governor Glenn Stevens said in a statement after the central bank’s Feb. 3 policy meeting, where the board cut rates by a quarter percentage point to 2.25 percent.

Government Infighting

Stevens’s task hasn’t been helped by the government in Canberra, where Prime Minister Tony Abbott has faced the kind of internal fighting over his leadership that saw the opposition Labor Party evicted from office in September 2013 as almost 40 percent of his lawmakers have indicated they don’t support him.

“The political position in Canberra for sometime has not been conducive to the kind of stable policymaking on infrastructure, competitiveness, on foreign investment, on trade,” Commonwealth Bank of Australia Chief Executive Ian Narev told reporters Wednesday. “We need to create an environment where businesses have confidence to invest and lead to job creation.”

Commodity Exports

Australia’s economy is also facing the effects of a fall in prices for its key commodity exports including an almost halving in that for iron ore in 2014. A 50 percent slump in oil prices last year could drive down prices of gas and coal.

Falling commodity prices in response to weakening demand from China and increased supply, and rising rate-cut bets have driven an 18 percent decline in the Australian dollar since the start of September.

source:bloomberg.com