Australia's jobless rate edged up in February reflecting the first loss in full-time jobs in eight months and suggesting interest rates may be kept on hold for a fourth consecutive month in April.
The Australian dollar fell and interest rate futures rallied on Thursday after the Australian Bureau of Statistics said the unemployment rate had risen to a seasonally adjusted 5.9 percent in February from a revised 5.8 percent in January.
The jobless rate is now its highest since September, but remains at a level the central Reserve Bank of Australia (RBA) has previously warned could lead to rising household debt and problems for the economy.
"It doesn't provide the Reserve Bank with the type of smoking gun that was probably required to see them tighten monetary policy after the April board meeting," said Scott Haslem, senior economist at UBS, referring to the central bank's monthly policy meetings.
The RBA has held interest rates at 5.25 percent, one of the highest in the industrialised world, since tightening policy twice late last year in an effort to contain consumer spending.
The data showed economy added just 1,300 jobs in February, well short of the forecast 20,000. All the gains were in part-time jobs, with full-time employment dropping by 13,100, the first decline since June 2003.
Bank bill futures, which indicate market thinking on the monetary policy outlook, rallied sharply on the jobs data. They are no longer fully pricing in a quarter-point tightening until the second quarter of 2005.
ENCOURAGE PAUSE: The Australian dollar slumped as low as 74.17 US cents from 74.90 prior to the job report as the prospects for higher interest rates to boost its 425 basis point yield premium over the US dollar diminished.
"The (jobs) data remains consistent with the economy coming off the boil," said Brian Redican, senior economist at Macquarie Bank.
"It lessens the chance of the Reserve Bank (raising rates) in April. We still think there is a chance they could go in the second quarter but this could be moved to the second half of the year," said Redican.
The Australian dollar touched a seven-year high of 80.05 cents in mid-February but fell as low as 74.02 cents after the RBA left rates unchanged in March.
The central bank has warned that the fall in the unemployment rate below six percent, a historically low figure, has fuelled household debt, which could leave the wider economy vulnerable and unbalanced if left unchecked.
However, lower sales rates at property auctions and signs that consumer optimism is waning suggest the pace of borrowing may slow.
"The state of the labour market is key to how highly indebted Australian households behave in an environment of even moderately higher interest rates," said Su-Lin Ong, strategist at RBC Capital Markets.
"The risk is that the current pause (in monetary policy) turns out to be an extended one," she said. The US Federal Reserve is widely expected to hold off raising rates until 2005 as the United States struggles to add new jobs even as the wider economy improves.
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