SYDNEY (Reuters) - Australia’s jobless rate surged by the most in 13 months in February while firms added full-time workers at the fastest pace in three years, a major surprise that suggests the economy is finally generating jobs after a painful fallow period.
The upbeat report sent the local dollar up half a U.S. cent as investors priced out any chance of a cut in interest rates, and even toyed with the idea of a hike late in 2015.
Thursday’s data from the Australian Bureau of Statistics showed employment climbed 47,300 in February, more than double market forecasts. January’s result was also revised up sharply to an 18,000 gain from a drop of 3,700.
Particularly encouraging was an 80,500 jump in full-time jobs, a sign firms were becoming more confident about taking on workers permanently.
Unemployment held at 6.0 percent as expected, but only because the participation rate rose as more people went looking for work, a trend that often marks the early stages of recovery.
The result should help soothe Australians’ growing worries about unemployment following recent announcements of job losses at a number of high profile firms.
“Hopefully people will take that as a positive sign that you can have job losses that are extremely well publicized in manufacturing, and they are offset by job gains mainly in the services sector,” said Michael Workman, a senior economist at Commonwealth Bank.
“We have an RBA rate rise penciled in for November and ... by then we’ll see much more consistent increases in employment in the 20,000-30,000 a month bracket.”
The pick-up in hiring would be a pleasant surprise to the Reserve Bank of Australia (RBA) since it had expected unemployment would rise gradually right through 2014.
Just last week RBA Governor Glenn Stevens told lawmakers unemployment lags economic activity by between three and six months, so recent signs of a pick-up in growth would not be evident in the labor market until the middle of the year at the earliest.
One worry has been that wall-to-wall media coverage of coming job cuts at firms such as Qantas, Toyota and Ford would take a toll on the national psyche.
A survey of consumers from Westpac out this week showed sentiment hit a 10-month low this month. The number of respondents recalling “employment-related news” was at its highest on record with most viewing the news-flow as negative.
The risk is that if consumers become worried enough about their jobs, they will cut back on spending and put a brake on economic growth.
So far the evidence suggests there is reason for optimism. It was notable that retail sales surged past all expectations in January, even while consumer surveys were pointing to a drop in confidence.
The housing market has continued to run hot with record clearance rates at auctions in Sydney and Melbourne.
Figures from property consultant RP Data-Rismark show a sharp uptick in activity and prices in the first week of March. Home prices across the major cities jumped 1 percent in the week alone, to be 10 percent higher on March last year.
The steady appreciation in home values is fattening household wealth and driving a major revival in residential construction. Data out this week showed new mortgages for home building running at their fastest pace in over four years.
“The ongoing lift in housing approvals, rising new home sales and higher house prices will support confidence and provide policymakers with a degree of encouragement,” said Savanth Sebastian, an economist at CommSec.
“With interest rates low, population rising and housing affordability still attractive, housing is best placed to take over the leadership role from mining as the nation’s key economic driver.”
Reporting by Wayne Cole; Editing by Richard Pullin