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Australian jobless jumps to highest since 2002; Aussie drops
[SYDNEY] Australia's unemployment rate climbed in January to a 12 1/2-year high as jobs were lost along the country's eastern seaboard, sending the currency lower and underscoring the central bank's decision last week to cut interest rates to a record low.
The jobless rate rose to 6.4 per cent from 6.1 per cent, the statistics bureau said in Sydney today. That was the highest since August 2002 and exceeded the median estimate of 6.2 per cent from a survey of 27 economists. The number of people employed fell by 12,200.
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.
"Domestic demand is not strong enough to absorb new entrants into the labor force," Katrina Ell, an economist at Moody's Analytics in Sydney who forecast a 6.3 per cent rate, said before the report.
The Australian dollar traded at 76.64 US cents at 11:42 am in Sydney, from 77.21 cents before the data was released.
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 per cent in January, 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 per cent.
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 per cent 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." 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 per cent slump in oil prices last year could drive down prices of gas and coal.
Traders see a 62 per cent chance that the RBA will cut its benchmark in March, according to swap market prices, up from 34 per cent at the start of the week.
Falling commodity prices in response to weakening demand from China and increased supply, and rising rate-cut bets have driven an almost 14 per cent decline in the Australian dollar since the start of September.