Published October 9, 2009
Australia's big jobs surge fuels rate fever
Sept employment jumps 40,600, eclipsing forecasts
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(SYDNEY) Australian employment surged past all expectations in September and the jobless rate dropped in what might be a surprisingly early turning point, adding to the case for more interest rate rises this year.
The Australian dollar jumped over half a US cent to a 14-month high and bill futures slid as the market priced in a real risk the Reserve Bank of Australia (RBA) would raise its 3.25 per cent cash rate in both November and December.
'This justifies the RBA's decision to begin its tightening cycle and supports further moves in the months ahead,' said Su-Lin Ong, a senior economist at RBC Capital Markets.
'We continue to look for another hike in November, a further 25 basis points in December and further increases in the first half of next year, taking the cash rate to 4.5 per cent.' This week, the central bank became the first in the Group of 20 biggest economies to raise rates, highlighting the performance of its economy and even generating optimism about a global recovery.
World markets had jumped on Tuesday's rate hike.
The RBA had also heralded more hikes, leading the market to price in a chance of another for November and rates of around 4 per cent by the middle of next year.
Now, investors were bringing that timing forward. One measure from Credit Suisse showed a move to 3.5 per cent was fully priced for November, while interbank futures shed 0.125 points to imply a one-month rate of 3.72 per cent in December.
'Today's data raise the risk the unemployment rate has already peaked at below 6 per cent, and reinforces our view that the RBA will reach a 4 per cent cash rate by March next year,' said Scott Haslem, chief economist at UBS. 'Anyway you look at it, this is a very strong report.'
Australia has dodged a recession defined as two straight quarters of shrinking output, one of the few developed countries to do so, with housing and banking holding up well, unlike the US and Britain.
Its largest export markets are in Asia, dominated by China, Japan and South Korea. China's infrastructure-led response to the downturn has ramped up steel production and as a result Australia's exports of coal and iron ore have surged.
The healthy demand for Australian goods has supported the broader economy and the labour market.
'There is no discernable move to shed labour and given the economy is on the path to glory I doubt very seriously it's about to start,' said Adam Carr, senior economist at ICAP.
Yesterday's government data showed 40,600 jobs were created in September, confounding forecasts of a 10,000 fall. There were 35,400 new full-time positions, which typically pay more and offer greater security than part-time work.
The unemployment rate dipped to 5.7 per cent, from 5.8 per cent in August, again stunning analysts who had expected a rise to a six-year high of 6.0 per cent.
So unexpected was this development that some wondered if it actually marked a turning point for unemployment, way below the government's forecast of 8.5 per cent.
'The jobless rate could have peaked two full percentage points below what most expected just a few months ago,' said Rory Robertson, interest rate strategist at Macquarie. 'A peak under 6 per cent would be simply sensational.' Analysts have for some time been revising down estimates for the peak of the jobless rate, but most had still thought it would be around 7.0 per cent.
Indicators of demand for labour have begun to turn higher, albeit from low levels. -- Reuters
Australia's big jobs surge fuels rate fever
Sept employment jumps 40,600, eclipsing forecasts
Email this article
Print article
Feedback
(SYDNEY) Australian employment surged past all expectations in September and the jobless rate dropped in what might be a surprisingly early turning point, adding to the case for more interest rate rises this year.
The Australian dollar jumped over half a US cent to a 14-month high and bill futures slid as the market priced in a real risk the Reserve Bank of Australia (RBA) would raise its 3.25 per cent cash rate in both November and December.
'This justifies the RBA's decision to begin its tightening cycle and supports further moves in the months ahead,' said Su-Lin Ong, a senior economist at RBC Capital Markets.
'We continue to look for another hike in November, a further 25 basis points in December and further increases in the first half of next year, taking the cash rate to 4.5 per cent.' This week, the central bank became the first in the Group of 20 biggest economies to raise rates, highlighting the performance of its economy and even generating optimism about a global recovery.
World markets had jumped on Tuesday's rate hike.
The RBA had also heralded more hikes, leading the market to price in a chance of another for November and rates of around 4 per cent by the middle of next year.
Now, investors were bringing that timing forward. One measure from Credit Suisse showed a move to 3.5 per cent was fully priced for November, while interbank futures shed 0.125 points to imply a one-month rate of 3.72 per cent in December.
'Today's data raise the risk the unemployment rate has already peaked at below 6 per cent, and reinforces our view that the RBA will reach a 4 per cent cash rate by March next year,' said Scott Haslem, chief economist at UBS. 'Anyway you look at it, this is a very strong report.'
Australia has dodged a recession defined as two straight quarters of shrinking output, one of the few developed countries to do so, with housing and banking holding up well, unlike the US and Britain.
Its largest export markets are in Asia, dominated by China, Japan and South Korea. China's infrastructure-led response to the downturn has ramped up steel production and as a result Australia's exports of coal and iron ore have surged.
The healthy demand for Australian goods has supported the broader economy and the labour market.
'There is no discernable move to shed labour and given the economy is on the path to glory I doubt very seriously it's about to start,' said Adam Carr, senior economist at ICAP.
Yesterday's government data showed 40,600 jobs were created in September, confounding forecasts of a 10,000 fall. There were 35,400 new full-time positions, which typically pay more and offer greater security than part-time work.
The unemployment rate dipped to 5.7 per cent, from 5.8 per cent in August, again stunning analysts who had expected a rise to a six-year high of 6.0 per cent.
So unexpected was this development that some wondered if it actually marked a turning point for unemployment, way below the government's forecast of 8.5 per cent.
'The jobless rate could have peaked two full percentage points below what most expected just a few months ago,' said Rory Robertson, interest rate strategist at Macquarie. 'A peak under 6 per cent would be simply sensational.' Analysts have for some time been revising down estimates for the peak of the jobless rate, but most had still thought it would be around 7.0 per cent.
Indicators of demand for labour have begun to turn higher, albeit from low levels. -- Reuters
