Australian employers unexpectedly cut jobs in December, capping the worst year of full-time losses since 1992, sending the Aussie to the lowest in more than three years and reviving prospects for interest-rate reductions.
The number of people employed dropped by 22,600, the statistics bureau said in Sydney today, compared with the median estimate for a 10,000 gain in a Bloomberg News survey of 27 economists. Unemployment held at 5.8 percent as the participation rate fell to the lowest in almost eight years.
The odds of a rate cut surged and the Aussie slumped to its lowest level since August 2010 as traders raised bets the Reserve Bank of Australia will add to its 2.25 percentage points of cuts to the overnight cash-rate target since late 2011. Australian companies and international carmakers have announced the shuttering of plants and shedding of jobs as an elevated currency intensified competition.
“The figures were a little bit nastier than expected,” said Alex Joiner, an economist at Bank of America Merrill Lynch in Melbourne. “Talk of the RBA raising rates later this year seems premature. Historically the Reserve Bank has never dropped its easing bias while the unemployment rate has been rising.”
The Australian dollar touched a three-year low after the data, and traded at 88.13 U.S. cents at 3:15 p.m. in Sydney from 88.95 cents prior to the release.
The number of full-time jobs declined by 31,600 in December, and part-time employment rose by 9,000, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, dropped to 64.6 percent in December from 64.8 percent a month earlier, it showed. It stood at 65.9 percent in November 2010.
The jobs gain in November was revised lower to 15,400, from a previously reported 21,000 increase.
Australia lost 67,500 full-time jobs in 2013, the worst annual performance since it shed 88,800 in 1992, when the country was emerging from its last recession, data compiled by Bloomberg show.
Without the dip in the participation rate, unemployment would have risen to 6.1 percent, said Justin Smirk, a senior economist in Sydney at Westpac Banking Corp., which had forecast a 10,000 drop in employment.
“This is a weak labor market,” Smirk said. “With anecdotes of firms forcing more employees to take leave over Christmas and rumors building of further retrenchments to come in many business services companies, we are closely watching how the data unfolds in early 2014.”
General Motors Co.’s Holden unit said last month it would stop making cars in Australia by the end of 2017, becoming the second automaker last year to announce its exit because of high production costs and a strong local currency. About 2,900 employees will lose their jobs at the automaker’s plants in South Australia and Victoria, it said.
Telstra Corp., Australia’s biggest phone company, said in September it would cut about 1,100 jobs within the next nine months to boost productivity.
The local carmaking operations of GM, Ford and Toyota Motor Corp. have been hit by an Australian dollar that surged almost 50 percent against the U.S. dollar from 2009 to 2012.
By state, job losses were largest in Victoria, the hub of the nation’s manufacturing industry, with 12,600, and in New South Wales, the nation’s most populous state, with 10,100.
Still, the RBA may be reluctant to lower borrowing costs further amid surging property values. Sydney home prices climbed 14.5 percent last year as the nation recorded its fastest increase in a calendar year since 2009, an RP Data-Rismark home value index showed. Approvals for owner-occupied home loans climbed 1.9 percent in November from a month earlier, data Jan. 13 showed.
Traders are pricing in about a 40 percent chance of a quarter percentage point rate cut at the RBA’s May meeting, according to swaps data compiled by Bloomberg. That compares with an 18 percent chance a week ago when rising house prices and confidence suggested the easing cycle may be over.
Australia’s Treasury predicts joblessness will increase to 6 percent by July 1, the highest since 2003. It projected in a Dec. 17 update that growth will be 2.5 percent this fiscal year, unchanged from its forecast ahead of the Sept. 7 election. Real gross domestic product growth in 2014-15 is seen at 2.5 percent, compared with 3 percent seen four months earlier.
Governor Glenn Stevens said last month that the RBA’s board has maintained an “open mind” on whether to cut rates further as it sees signs low borrowing costs are supporting spending.
The Liberal-National coalition government has pledged to revoke a Labor-implemented carbon-price mechanism and tax on iron-ore and coal profits, along with cutting red tape as signs emerge of a slowdown in the nation’s $1.5 trillion economy. From July 1, when a new Senate convenes, it will have to negotiate with a bloc of minor parties holding the balance of power in the Senate to pass laws.
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