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Australia jobs rebound, A$ still hits 4-yr trough
[SYDNEY] Australian employment rebounded in October to keep the jobless rate steady at 6.2 per cent, though lingering concerns about the reliability of the data still led investors to sell the local dollar to four-year lows.
Thursday's figures from the Australian Bureau of Statistics estimated employment rose 24,100 in October, recovering from a revised 23,700 drop the previous month. Encouragingly, all the gains came in full-time jobs which climbed 33,400.
While solid on the surface, the jobs survey has been plagued with so many problems in recent months that investors have lost confidence in the series. "Even with the ABS's best efforts to get the seasonal adjustment right, it will be a while before faith can be restored," said Michael Turner, a strategist at RBC Capital Markets. "We will take it with a bag of salt, not just the grain." Not in doubt were the benefits of the latest slide in the Australian dollar which carved out a four-year trough of US$0.8554 amid broad-based strength in its U.S. counterpart.
The fall will be warmly welcomed by the Reserve Bank of Australia (RBA) which has been agitating for a lower currency to help offset falling prices for the country's major commodity exports, which are priced in US dollars.
With major chart support at US$0.8640 now done and dusted, analysts see a risk of a protracted decline to a previous trough at US$0.8385 and even as far as US$0.8050. "The RBA has made it pretty clear that they would like a lower currency, and the market has been delivering that over the last few days," said Michael Blythe, chief economist at Commonwealth Bank of Australia.
The central bank releases its quarterly outlook for the economy and policy on Friday and the market will be keen to see how it characterises the drop in the currency.
A sustained fall would only reinforce market expectations that interest rates would not be cut again, though a hike is still seen as a distant prospect.
The RBA this week left rates at 2.5 per cent for a 14th straight policy meeting and reiterated its steady policy outlook. Interest rate futures imply only a small chance of a move right out to 2016, which would be the longest policy pause in modern times.
While low rates have boosted home building and consumer wealth, the jury is still out on whether they alone will be enough to offset the drag from falling investment in the mining sector as a decade-long boom winds down.
Gauging the true state of the economy has been made all the harder by statistical problems afflicting the labour data which has forced the ABS to restate months of numbers and adopt a whole new method of seasonal adjustment.
The net result had been to nudge up the jobless rate and make employment seem softer than previously reported.
That contrasted with other indicators of labour demand including vacancies and business surveys, which pointed to some improvement in recent months and left analysts bemused about the true situation. "Just about every leading indicator suggests that we're at a turning point around now," said CBA's Blythe. "But clearly there will be some suspicion about the reliability of these numbers for a while as we all digest recent changes."