Tags: Australia | Unemployment | Work

Australia's Unemployment Rises as More Seek Work

Thursday, 11 Nov 2010 01:05 PM

Australian employment rose solidly in October as firms hired more part-time workers, but the jobless rate jumped as the buoyant economy drew a lot more people into the work force — a trend that could lessen the need for higher interest rates.

Thursday's data showed 29,700 net new hires, above the 20,000 forecast, though full-time employment dropped 14,100 after a big rise the month before. The jobless rate rose to 5.4 percent, from 5.1 percent, when analysts had looked for a drop to 5.0 percent.

However, the surprise was a function of a huge leap in the participation rate — those actively looking for work — to a record 65.9 percent.

That suggested the economy could tolerate strong jobs growth without generating inflationary pressure and, if sustained, could lessen the need for higher interest rates.

"Strong levels of participation are consistent with a strong and healthy labor market," said Su-Lin Ong, a senior economist at RBC Capital Markets.

"Once unemployment starts to move below 5.0 percent, it can generate upwards pressure on wages and prices," she added.

"But today's numbers provide a reminder than these high levels of participation are going to temper the rate at which the unemployment rate can fall."

Investors initially bid the Australian dollar up half a cent to $1.0100 on the solid rise in employment before the impact of the higher jobless rate pulled it back to $1.0035.

Interbank futures were little changed with the market still pricing in around a one-in-three chance of a hike in interest rates by February.

The Reserve Bank of Australia surprised many last week by lifting its cash rate 25 basis points to 4.75 percent as a pre-emptive strike on inflation.

JOBS MACHINE

Employment has outstripped all expectations for successive months, rising by a huge 375,300 in the year to October. Putting that in perspective, an equivalent increase in U.S. payrolls would be around 4.6 million.

Much of that growth has been in full-time jobs, which tend to offer better pay and conditions than part-time work, helping boost incomes and confidence across the economy.

Jobs growth has been fastest in the booming mining and energy sector, running at 20 percent a year, while the biggest hiring has been in professional, scientific and technical services, education and health.

A record pace of resource investment is also driving jobs in construction. The A$43 billion Gorgon liquefied gas project alone will employ 10,000 at the peak of construction.

Most forward indicators of labor demand also point to further jobs growth ahead, albeit likely at a more tempered pace.

The sting in the tail is that unemployment was approaching lows that have bred wage and price pressures in the past.

In particular, the central bank will want to avoid a repeat of 2007 to 2008 when the jobless rate fell steadily to a trough of 4 percent while annual underlying inflation raced to peak of 4.7 percent, well above the central bank's 2 to 3 percent target.

Thus, October's jump in the total labor force, which reached 12 million for the first time, was a promising sign.

"When it to comes to the big picture for Australia, this is great news," said Roland Randall, a strategist at TD Securities.

"We've got historic highs for the participation rate which means employment can be stronger without leading to inflation."

© 2017 Thomson/Reuters. All rights reserved.

   
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Australian employment rose solidly in October as firms hired more part-time workers, but the jobless rate jumped as the buoyant economy drew a lot more people into the work force a trend that could lessen the need for higher interest rates. Thursday's data showed 29,700...
Australia,Unemployment,Work
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2010-05-11
Thursday, 11 Nov 2010 01:05 PM
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