Australian employment jumped contrary to all expectations in April, pulling the jobless rate down and throwing into doubt the need for further interest rate cuts.
Thursday's data also showed a huge 49,100 rise in full-time jobs, which typically offer greater pay and security.
This follows unexpectedly strong retail sales figures for March, suggesting Australia's economy might not be faring
nearly as badly as many believed.
Key points:
- April employment +27,300 mth/mth, seasonally adjusted
(Reuters poll: -25,000)
- April full-time employment +49,100, part-time -21,800
- April unemployment rate 5.4%, seasonally adjusted
(forecast 5.9 pct)
- April participation rate 65.4%, seasonally
adjusted (forecast 65.4 pct)
Commentary:
Rory Robertson, interest rate strategist, Macquarie
"It's very good news. It means employment is not deteriorating as badly as it seemed just a month ago. Likewise,
the unemployment trend is still up, but not as dramatically.
"On the face of it, it suggests Australia's recession might not be as deep or long as first feared. The RBA will be on hold for the next couple of months, though recessions do tend to be lengthy affairs and there's plenty of scope for bad news down the track."
Stephen Roberts, economist, Nomura
"The numbers are much stronger than expected. It's a bit surprising given the weakness that has run through all of the indicators of employment. A possible explanation is this is just a reaction to the extent of the decline and may not persist. This tends to suggest that conditions in Australia are not quite as weak as expected.
"The economy is still pretty soft and we need to see this data confirmed next month. I expect the Reserve Bank of
Australia to hold rates for a period until they raise them again. I still have 2.00% by the end of the year."
Helen Kevans, economist, JP Morgan
"It is a big surprise. We're really taking it with a grain of salt. We've counted through media announcements and the like, about 60,000 job losses over the last few months alone.
So it is really hard to believe 27,000 odd jobs were created last month.
"I think the RBA will focus more on the trend in employment, and we do think employment will continue to contract throughout 2009. The leading indicators of employment have been falling off a cliff, so we do think labour market conditions will continue to weaken. We are going to see that unemployment rate rise quite sharply over the second half of the year."
Annette Beacher, senior strategist, TD Securities
"I'm in shock. There's absolutely no economic justification for a bounce in employment. I'm just ploughing through the ABS report to see if there's a new standard error. but I can't see anything so I'll have to treat the data with scepticism.
"Given unemployment is expected to rise in the current environment as growth is slowing, this could be an outlier.
Those who have looked for a hike for the next interest rate move will find comfort in these numbers."
But this doesn't alter our fundamental view of the economy.
We still see rates bottoming at 2% and we look for GDP to have contracted 0.7% this quarter."
Market reaction:
The Australian dollar jumped half a US cent to a seven-month high after the strong data. Bill futures tumbled as investors priced in far less chance of further cuts in interest rates by the Reserve Bank of Australia (RBA). The ASX200 share index extended its gains for the day, trading recently up 2.2%.
Background:
- The median forecast had been for a fall of 25,000 in employment in April, while estimates for this volatile series
ranged from a fall of 10,000 to as much as 50,000.
- The jobless rate was seen climbing to 5.9%, the highest since July 2003, from 5.7% in March and a trough of 3.9% in February last year.
- Job losses had been limited until recently, in part because a past shortage of skilled workers made employers
reluctant to lay people off.
- But demand for new labour shrank sharply, sending job advertisements down by half in the past year. That means not
enough new jobs are being created to meet growth in the working population, pushing the jobless rate up.
- Also, the number of people looking for work has unexpectedly risen, perhaps because households are trying to
repair savings ravaged by last year's slump in share markets.
- As a result, the unemployment rate has shot higher, rising 1.2 percentage points since December alone, and analysts
fear it could well top 8% next year.
- The RBA has always responded to rising unemployment by cutting interest rates and has pre-empted the worsening trend by easing 425 basis points since September.
Reuters
