Source: Australian Bureau of Statistics
Australian employers cut full-time workers in October by the most in more than a year, sending the local dollar lower as traders increased bets the central bank will keep interest rates at a record low.
The number of full-time jobs declined by 27,900, the statistics bureau said in Sydney today, the most since June 2012. The total number of people employed rose by 1,100 -- less than the 10,000 increase expected in a Bloomberg News survey -- as part-time employment increased by 28,900. The jobless rate held at a revised 5.7 percent.
Traders unwound bets that the Reserve Bank of Australia’s next interest rate move will be an increase, which had been spurred by a rebound in business and consumer confidence since Tony Abbott’s coalition restored majority government on Sept. 7. The RBA reduced rates by 2.25 percentage points since late 2011 to a record-low 2.5 percent to help offset the squeeze from an elevated local dollar and spur industries outside mining.
The jobs report “keeps that easing bias in place,” said Michael Blythe, chief economist at Commonwealth Bank of Australia. The RBA has “made it pretty clear I think they want that easing to come through a lower currency, which would in fact be probably the best help that those sectors that are shedding jobs can get at the moment,” he said.
Unemployment climbed to 5.9 percent in New South Wales and Victoria, the nation’s two most populous states, the report showed. It jumped to 6.6 percent in the manufacturing state of South Australia, where General Motors Co.’s local unit is struggling with high costs and the strong currency.
The Australian dollar fell to 94.78 U.S. cents at 4:10 p.m. in Sydney from 95.20 cents before the data were released. Swaps traders lowered bets on rate increases in Australia, with 16 basis points priced in over a year compared with 22 basis points yesterday, a Credit Suisse Group AG index shows.
The participation rate, a measure of the labor force in proportion to the population, held at 64.8 percent in October, the report showed.
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. Elders Ltd. (ELD), an Australian agricultural company, said Sept. 10 it will reduce about 10 percent of its workforce as it reorganizes its business and reduces debt.
The local dollar was the best performing group of 10 currency last month, hurting export-related industries. The RBA left its benchmark rate unchanged this week, as Governor Glenn Stevens intensified his language on the exchange rate, warning the currency was “uncomfortably high” and a lower level would be needed to achieve balanced growth.
Stevens, in a speech last week, said the local currency’s level isn’t supported by costs and productivity in the economy and the nation’s terms of trade are more likely to fall than rise. “It seems quite likely that at some point in the future the Australian dollar will be materially lower than it is today,” he said in the Oct. 29 address.
Elsewhere, New Zealand house prices rose in October by the most since January 2008, according to Quotable Value New Zealand, a government-owned property research company. Malaysia will hold its overnight policy rate at 3 percent, according to economists surveyed by Bloomberg.
In Europe, economists forecast the Bank of England will keep its benchmark rate unchanged at 0.5 percent, while Germany is scheduled to report industrial production data for September. The U.S. economy probably slowed in the third quarter, indicating the expansion was losing momentum even before the partial government shutdown, while the number or Americans filing applications for unemployment benefits likely remained high, economists project reports will show.
In Australia, a private survey released Oct. 8 showed employment conditions remained poor in September even as business confidence surged to the highest level in 3 1/2 years.
Today’s jobs data may indicate “the Reserve Bank’s not finished after all,” Stephen Walters, JPMorgan Chase & Co.’s chief economist in Australia who predicts a rate cut next quarter, said in an interview with Bloomberg television. “If you did get the Aussie dollar climbing back up towards parity that would certainly bring the Reserve Bank back into play.”
Source: Australian Bureau of Statistics
Chart: WorldWideMarkets Alpha Trader