Australian Unemployment Climbs Despite Full-Time Jobs Surge

(Bloomberg) -- Australia’s jobless rate unexpectedly climbed in January despite a surge in full-time employment as more people hunted for work.

Unemployment rose to 5.3% last month, compared with economists’ estimate of 5.2%, data from the Australian Bureau of Statistics showed Thursday. The participation rate increased to 66.1% and 13,500 jobs were added last month, slightly exceeding forecasts.

“The labor market started 2020 on a weak note,” said Callam Pickering, an economist at global jobs website Indeed Inc. who previously worked at the central bank. He said the data don’t reflect the impact of the coronavirus shutdown on export and import industries and warned, “there is a real risk that the unemployment rate spikes in the coming months.

The data extends a three-year run of hiring strength that has withstood volatility offshore and a slowdown at home. Yet the job market’s health has failed to push unemployment lower and wages higher as it coincided with a swelling labor force. This led the Reserve Bank of Australia to cut rates three times last year to buttress investment and drive faster growth and inflation.

The further easing of rates has delivered few results outside reinvigorating house price growth. Governor Philip Lowe maintains “long and variable lags” in monetary policy mean it will take time for stimulus to work its way through the economy. He maintains rising property prices are a necessary forerunner to an eventual recovery in residential construction and households feeling wealthier will be more inclined to spend.

Other data released in the report painted a mixed picture.

• Full-time jobs climbed by 46,200 while part-time roles fell by 32,700; indeed, in the past three years more than three-quarters of new jobs have been full-time positions
• Underemployment climbed 0.3 percentage point to 8.6%
• Monthly hours worked decreased by 8.1 million, or 0.4%

“The disruption from the bushfires did not have a notable impact on key headline statistics,” the ABS said.

What Bloomberg’s Economists Say

“Australia’s unemployment rate is heading in the wrong direction. Demand for labor -- be it jobs, or hours worked -- is slowing, while an elevated participation rate is boosting supply. This is the opposite of the gradual tightening the RBA is hoping will drive a recovery in wage pressures, and ultimately guiding inflation gradually back toward the target band. Were it not for the buoyant housing market these trends would tip the RBA into cutting rates.”

James McIntyre, economist

The central bank’s cash rate is at a record low 0.75% and Lowe estimates the lower bound is at 0.25%, meaning he has just two cuts remaining in the policy arsenal before unconventional policy becomes a possibility.

The Aussie dollar is currently trading around the lowest in a decade, assisting exporters amid challenging global trading conditions from shutdowns imposed to curb the coronavirus and earlier bushfires. It declined after the jobs data and was trading at 66.43 U.S. cents at 1:24 p.m. in Sydney.

The RBA, in its quarterly economic update earlier this month, forecast the unemployment to remain around 5.25% through June, before edging lower, and wage growth stuck at the current 2.2%, before lifting slightly.

Traders are pricing in little chance of a rate cut in the next two months, with bets climbing above 50% in July.

--With assistance from Michael G. Wilson and Tomoko Sato.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editors responsible for this story: Paul Jackson at pjackson53@bloomberg.net, Alexandra Veroude, Malcolm Scott

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