Jobless rate in Australia hits 10-year high
Australia's jobless rate unexpectedly jumped to a decade high last month, intensifying concerns about the future of the manufacturing sector as global carmakers prepare to pull out.
The Australian dollar dropped nearly 1 US cent on speculation interest rates might have to be eased again.
Yesterday's data from the Australian Bureau of Statistics showed unemployment rose to 6 per cent, the highest level since July 2003 and well above forecasts of 5.8 per cent.
A net 3,700 jobs were lost in the month, following a sharp 23,000 drop in December. This meant no jobs had been created at all in the past 12 months.
The poor report puts the Reserve Bank of Australia in a tough spot, as only last week it shut the door on more easing, citing signs that past cuts were boosting activity along with an unwelcome pickup in inflation.
The central bank has repeatedly said it expected unemployment to rise gradually this year, so the numbers would not be a total shock. Yet were the jobless rate to move much above 6 per cent, pressure would surely grow for a further cut in the 2.5 per cent cash rate.
"Overall, a poor start to 2014, and while some may argue that employment is a lagging indicator, we would also suggest this print will be a negative for household income, sentiment and thus spending," said Justin Smirk, a senior economist at Westpac.
The report will add to the gloom that followed Toyota Motor's decision this week to join Ford Motor and the Holden unit of General Motors in ceasing production in Australia by 2017.
The closures will be a blow to an already sluggish labour market, given the statistics bureau's estimates that about 45,000 people are employed in vehicle and parts manufacturing, with Toyota, Holden and Ford accounting for 8,000 directly.
Alan Oster, the chief economist at National Australia Bank, also noted the lay-offs will come as a number of major resource projects are set to be completed, with a resulting loss of construction jobs. "The demise of the automotive construction industry can be expected to represent an additional headwind for the Australian labour market over the next 12 to 18 months," he said.