Australia employment again stuns with its strength
Thu, Jan 14, 2010
Reuters
SYDNEY - Australian employment blew past expectations for a fourth straight month in December while the
jobless rate fell to an eight-month low, a remarkable result that argues for yet higher interest rates.
The Australian dollar jumped half a cent and bill futures slid as the market priced in a 75 percent chance of another
rate hike at the Reserve Bank of Australia's (RBA) next policy meeting on Feb. 2.
"It's an extraordinary result," said Brian Redican, senior economist at Macquarie. "I think even the sceptics will have to concede that unemployment has probably peaked now."
"For the RBA, it means there's less spare capacity in the economy than anyone expected and that puts a lot more pressure on for a hike in February," he added.
Thursday's report from the government showed a net 35,200 new jobs were created in December, over three times the market forecast. The jobless rate dropped to 5.5 percent, the lowest since April, from a downwardly revised 5.6 percent in November.
The central bank has already lifted its key cash rate by 75 basis points to 3.75 percent, a marked contrast to many other developed nations where rates languish at 1 percent or less.
That is because its economy is recovering far quicker than others thanks in part to aggressive stimulus, a sound banking system and insatiable Asian demand for its commodity exports.
Now, investors are pricing in an odds-on probability of a further rate rise to 4.0 percent in February, and a total 130
basis points of tightening in the next 12 months.
Employment has now climbed 135,700 in the past four months to stand at 10.9 million. In the United States that would equate to an increase of around 1.6 million in non-farm payrolls, compared to the 347,000 jobs actually lost.
"It's fairly clear from the labour market that the conditions here are not as bad as in the United States, Europe
and the UK," said Michael Workman, a senior economist at Commonwealth Bank.
"Therefore, we think the RBA will be gradually raising rates. We are looking at small rate rises in February and
March."
UNEMPLOYMENT ALREADY PEAKED
The labour market surprised everyone by its resilience last year, with firms reluctant to fire skilled labour and insteadshifting people to part-time work.
The jobless rate could still rise further as rapid population growth pushes more people into the workforce,
keeping the participation rate near historical highs.
But demand for labour is also recovering. The government's leading indicator of employment rose in January for the seventh straight month, while job advertisements jumped by the most in 31 months in December.
Indeed, many analysts now think the unemployment rate may have already topped out at October's 5.8 percent, much below initial fears. As recently as May, the government forecast a high of 8.5 percent for unemployment.
"We're quite amazed about the strength and resilience of the labour market," said Helen Kevans, an economist at
JPMorgan.
"It's really raising expectations that the unemployment rate has already peaked and from here on in we're going to see unemployment continue to tighten," she added.
If the optimists are right it would have powerful implications for the economy, boosting household incomes,
confidence and spending, as well as tax receipts.
It could also lead to a shortage of skilled workers, particularly in the booming construction and resource sectors.
The Housing Industry Association estimates a shortage of almost 60,000 construction workers this year and mining
companies are already complaining of a lack of trained labour.
"It suggests the RBA is going to tighten policy a little bit faster than we expected throughout 2010," said Kevans.
"We had forecast a cash rate of 5.0 percent by year end, but if anything, there is upside risk to that, particularly
because such a tight labour market is going to add to wage pressure."
Thu, Jan 14, 2010
Reuters
SYDNEY - Australian employment blew past expectations for a fourth straight month in December while the
jobless rate fell to an eight-month low, a remarkable result that argues for yet higher interest rates.
The Australian dollar jumped half a cent and bill futures slid as the market priced in a 75 percent chance of another
rate hike at the Reserve Bank of Australia's (RBA) next policy meeting on Feb. 2.
"It's an extraordinary result," said Brian Redican, senior economist at Macquarie. "I think even the sceptics will have to concede that unemployment has probably peaked now."
"For the RBA, it means there's less spare capacity in the economy than anyone expected and that puts a lot more pressure on for a hike in February," he added.
Thursday's report from the government showed a net 35,200 new jobs were created in December, over three times the market forecast. The jobless rate dropped to 5.5 percent, the lowest since April, from a downwardly revised 5.6 percent in November.
The central bank has already lifted its key cash rate by 75 basis points to 3.75 percent, a marked contrast to many other developed nations where rates languish at 1 percent or less.
That is because its economy is recovering far quicker than others thanks in part to aggressive stimulus, a sound banking system and insatiable Asian demand for its commodity exports.
Now, investors are pricing in an odds-on probability of a further rate rise to 4.0 percent in February, and a total 130
basis points of tightening in the next 12 months.
Employment has now climbed 135,700 in the past four months to stand at 10.9 million. In the United States that would equate to an increase of around 1.6 million in non-farm payrolls, compared to the 347,000 jobs actually lost.
"It's fairly clear from the labour market that the conditions here are not as bad as in the United States, Europe
and the UK," said Michael Workman, a senior economist at Commonwealth Bank.
"Therefore, we think the RBA will be gradually raising rates. We are looking at small rate rises in February and
March."
UNEMPLOYMENT ALREADY PEAKED
The labour market surprised everyone by its resilience last year, with firms reluctant to fire skilled labour and insteadshifting people to part-time work.
The jobless rate could still rise further as rapid population growth pushes more people into the workforce,
keeping the participation rate near historical highs.
But demand for labour is also recovering. The government's leading indicator of employment rose in January for the seventh straight month, while job advertisements jumped by the most in 31 months in December.
Indeed, many analysts now think the unemployment rate may have already topped out at October's 5.8 percent, much below initial fears. As recently as May, the government forecast a high of 8.5 percent for unemployment.
"We're quite amazed about the strength and resilience of the labour market," said Helen Kevans, an economist at
JPMorgan.
"It's really raising expectations that the unemployment rate has already peaked and from here on in we're going to see unemployment continue to tighten," she added.
If the optimists are right it would have powerful implications for the economy, boosting household incomes,
confidence and spending, as well as tax receipts.
It could also lead to a shortage of skilled workers, particularly in the booming construction and resource sectors.
The Housing Industry Association estimates a shortage of almost 60,000 construction workers this year and mining
companies are already complaining of a lack of trained labour.
"It suggests the RBA is going to tighten policy a little bit faster than we expected throughout 2010," said Kevans.
"We had forecast a cash rate of 5.0 percent by year end, but if anything, there is upside risk to that, particularly
because such a tight labour market is going to add to wage pressure."
