Australian employment fell by less than expected overall in December but a steep drop in full-time positions and a rise in the jobless rate heralded weakness ahead, reinforcing the case for further interest rate cuts. Thursday's report from the government showed a net 1,200 jobs were lost overall in December, well below market forecasts of a 20,000 drop.
However, firms cut full-time employment by a steep 43,900, the biggest drop in five years, and these are jobs that tend to pay more and offer better security than part-time work. The unemployment rate also ticked up to 4.5 percent, from 4.4 percent in November, the highest since March, 2007. "There's a switch going on from full-time to part-time as hours are cut, which usually comes before outright job shedding," said Brian Redican, a senior economist at Macquarie.
"It could have been much worse given the global backdrop but this is more of a stay of execution rather than an outright reprieve," he added, predicting the jobless rate would climb to 6.0 percent by year-end. The Reserve Bank of Australia (RBA) has already cut its key cash rate by 3 percentage points to 4.25 percent, the lowest in over six years, partly to try and lessen the coming rise in unemployment. But a litany of dire economic news from the United States, eurozone and Asia has convinced investors the central bank has to loosen a lot more.
Interest rate futures are now pricing in a cut of at least 75 basis points when the RBA meets on February 3, and yet further drastic easing to historic lows of 2.5 percent by May. A Reuters poll taken late last year showed analysts generally expected unemployment to rise to around 6.0 percent by year-end and peak around 6.5 percent in 2010, though a few feared it could rise a lot further. Demand for labour in Australia has already been weakening for some time.
Job advertisements in newspapers and on the Internet have been falling since May and dropped at a record pace in November and December. Ads in newspapers alone were down a huge 52 percent in December from a year before, losses not suffered since the recession of 1982. Yet firms were still reluctant to actually lay off trained workers having spent the last few years struggling to find suitable labour when the times were good.