Australian Dollar Jumps on Employment Surge
(Bloomberg) -- Australian employment surged in January, led by full-time roles, suggesting the Reserve Bank has more time to assess whether the economy needs an interest-rate cut.
Australia added 65,400 full-time positions, while shedding 26,300 part-time ones, data from the Bureau of Statistics showed in Sydney Thursday. Unemployment held at 5 percent as more people sought work.
“The data will reassure the RBA that underlying momentum in the economy is still positive,” said Sarah Hunter, head of macroeconomics at BIS Oxford Economics in Sydney. “But we are still somewhat cautious about the outlook. Strong employment growth will help to support consumer spending -- and therefore GDP growth -- but households continue to face weak growth in wages.”
Strong hiring has been a consistent bright spot in an economy otherwise struggling with tumbling property prices, weak wages and high household debt. Central bank Governor Philip Lowe earlier this month dropped a tightening bias in the face of these headwinds, though his central forecast remains for falling unemployment to eventually drive wages higher and return inflation to the midpoint of its 2-3 percent target.
Yet unemployment is likely to need to fall much further to lift prices, as decreasing joblessness fails to spur the pay gains seen in the past. While New South Wales unemployment fell to 3.9 percent from 4.3 percent in December, data Wednesday showed little sign of this igniting salary growth in Australia’s most populous state.
The Australian dollar soared about 0.6 percent following Thursday’s jobs report. But the gains were soon erased when Westpac Banking Corp.’s Bill Evans changed his interest-rate call, saying he now expects cuts in August and November this year.
Other Key Details:
- A total 39,100 jobs were added in January and the participation rate climbed to 65.7 percent from 65.6 percent
- Underemployment fell 0.2 percentage point to 8.1 percent; while underutilization -- the sum of the unemployment and underemployment rates -- fell 0.1 point to 13.2 percent
“The underutilization rate is still much too high, contributing to the soft wage growth,” said Callam Pickering, an economist at global jobs website Indeed who previously worked at the RBA. “We are unlikely to see wage growth of 3 percent or higher until the underutilization rate pushes below 12 percent. That could take at least another couple of years.”
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