UPDATE 1-Australian jobs rise softens blow of GM exit

Wed Dec 11, 2013 9:05pm EST

* Employment rises 21,000 in November, double the forecast

* Jobless rate still ticks up to 5.8 pct, highest in 3 months

* More hiring welcome news after GM decision to exit Australia

By Wayne Cole

SYDNEY, Dec 12 (Reuters) - Australian employment beat expectations with the biggest increase in seven months in November, helping soften the blow of planned job losses in the country's ailing car industry.

Data on Thursday from the Australian Bureau of Statistics showed 21,000 net new jobs were created in November, more than twice the market forecast. Yet it was still not enough to stop the unemployment rate from ticking up to 5.8 percent as more people entered the labour force.

The jobless rate is still expected to rise gradually given the economy grew only 2.3 percent in the year to September, well short of the 3.25 to 3.5 percent pace considered "normal".

The data comes just a day after the local unit of General Motors Co said it would stop making vehicles by the end of 2017, with the direct loss of 2,900 jobs and likely more in supporting industries.

The decision was a major blow to sentiment as Ford Motor Co had already announced plans to close its operations by 2016, which would leave Toyota Motor Corp as the lone automaker in Australia. Around 45,000 people work in the automotive industry, split between 17,000 employed directly by carmakers and the rest in the supply chain.

It was also a headache for the newly elected Liberal National Government of Tony Abbott, which had scrambled to try to keep the U.S. automaker in the country but eventually balked at the scale of subsidies it would require.

Various governments have for years poured billions of tax payer dollars into the industry until Abbott finally ran out of patience and demanded GM stand on its own feet.

The Australian Industry Group, the main lobby association, was quick to call on the government for action.

"With the right policy settings and industry attitude, Holden's workforce can move into new areas where their skills can contribute to growing manufacturing and innovative capabilities and we can develop new sources of industrial strength," said Ai Group chief executive, Innes Willox.

SIGNS OF LIFE

GM's decision was taken as symptomatic of the entire manufacturing industry, which has been shoved into a competitive vice by a high local dollar.

Yet a major survey of manufacturing released on Thursday reported a significant improvement in conditions in the three months to December.

The long running survey from the Australian Chamber of Commerce and Industry & Westpac Banking Corporation found firms reported a sharp rise in both output and new orders.

"Australian manufacturers clearly anticipate a further improvement in conditions in early 2014 driven by domestic demand," said Elliot Clarke, an economist at Westpac.

"On employment, manufacturers look to have put an end to the job shedding that has been a key finding of this survey over the past two years."

Some manufacturing sectors still manage to thrive despite the high currency. Scientific instruments, largely medical, pharmaceuticals, machinery, chemicals, paper products and fertilisers have all enjoyed healthy export growth in recent years.

In truth, Australian manufacturing has been in relative decline for the past two decades, and through long periods when the local dollar was much lower than it is now.

Manufacturing's share of the country's A$1.5 trillion in annual gross domestic product has halved since the early 1990s to stand at 6.6 percent. In the same period, output from iron ore mining has expanded by nine times to account for 4.2 percent of GDP.

Manufacturers employ less than 8 percent of Australia's 11.7 million strong labour force, well behind sectors such as construction, retailing and healthcare.

Mining has been another source of jobs strength, though that is set to wane in coming years as the labour-intensive phase of the boom in resource investment transitions to the production phase. It takes a lot more workers to build an iron ore mine or liquefied natural gas plant than it takes to run one - up to 20 times more.

Policymakers are hoping a revival in home and commercial construction will absorb some of these displaced workers. There is evidence that housing at least is on the mend, with approvals to build new homes up almost a quarter in the year to October.

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