Posted on February 12, 2015 by the XM Investment Research Desk at 11:02 am GMT
Australian unemployment for January surprised on the upside when it was released earlier today and was accompanied by news that the economy actually lost 12 thousand jobs instead of creating 5 thousand as economists expected.
The jobless rate climbed to its highest since 2002 at 6.4% compared with a rate of 6.1% the previous month and economists’ expectation that unemployment was only going to rise to 6.2% – a level it was at during October and November.
The net loss of 12 thousand jobs on the month masks the fact that a significant loss of 28 thousand full-time positions was moderated by the creation of nearly 16 thousand part-time jobs. Part-time jobs are of course not as beneficial to the economy as full-time jobs. Furthermore, inside the details of the report, Eastern states that are less dependent on mining, posted heavier job losses compared to Western states. This shows that the economy’s rebalancing away from the mining sector is not taking place as planned.
It should also be noted that Australian employment statistics have had some statistical issues in previous months because of volatility and perhaps inconsistencies because of the seasonal adjustment methods. This casts some doubts on the usefulness of the data when considered in isolation and they should preferably be used in combination with other indicators or looked at with a longer-time frame.
The news sparked speculation that the Reserve Bank of Australia would soon follow up its early February rate cut with additional cuts. The RBA last week cut interest rates to 2.25% from 2.50% – a level it previously held since August of 2013. 2.25% is an all-time low for the RBA’s Cash Target Rate. The next meeting of the RBA board is on March 3.
The Australian dollar dropped around ¾ of a cent against the US dollar – from around 0.7728 to a low of 0.7643, but refrained from testing the 0.7627 5 ½ – year low struck on February 3 right after the RBA cut interest rates. The RBA will probably be looking towards further weakness in the exchange rate in order to help the economy from the effect of lower commodity prices and 75 cents has been cited as a possible ‘fair value’ level by RBA officials in the past.