Australian employment up again, jobless drop surprises

Australian employment outstripped expectations for a second month in November and the jobless rate surprised everyone with a drop to 5.2 percent, an encouraging report that could lessen the urgency for more rate cuts. The local dollar rose a third of a US cent after the Australian Bureau of Statistics reported 13,900 net new jobs were created in November, beating forecasts of a flat outcome.
The drop in the jobless rate to a three-month low of 5.2 percent confounded expectations of a rise to 5.5 percent and could calm concerns that unemployment was bound to increase in coming months amid a slowing economy. The market slightly lengthened the odds of further cuts in interest rates after the Reserve Bank of Australia (RBA) eased a quarter point this week, taking the cash rate back to the record lows of 3 percent touched during the global financial crisis.
"The headlines are much better than expected," said Matthew Johnson, an interest rate strategist at UBS. "This labour market report puts the higher unemployment rate a little further away." "The details are probably not as big a change as headlines suggest, but it makes it more difficult to see the RBA moving rates in February. The RBA will need to see a higher unemployment rate and very low inflation to cut again in February."
Interbank futures Slipped to show a 42 percent chance of a move at the RBA's next policy meeting in February. Swap rates pared the probability to 52 percent, from 62 percent before the data. The figures seemed to support RBA expectations that the unemployment rate would only rise "a little further" in coming months. Many analysts had seen a risk it could increase steadily toward 6 percent as a boom in mining investment begins to plateau next year.
Those worries had been stoked by Wednesday's data on gross domestic product (GDP), which showed the economy grew at the slowest pace in a year-and-a-half last quarter. Crucially, sharply lower export earnings hit incomes across the economy, from profits to wages and tax receipts, and threaten to put upward pressure on unemployment. "With mining investment slowing, the economy needs to generate more growth in other industries to avoid a faster-than -expected rise in unemployment," said UBS Scott Haslem, an economist at UBS. The pick-up in hiring in November lifted annual employment growth to 1.1 percent, from 0.9 percent in October, bringing it nearer the historical trend of around 1.5 percent.