Wednesday, June 10, 2009

Australia Lost Fewer-Than-Estimated 1,700 Jobs in May (Update2)

By Jacob Greber

June 11 (Bloomberg) -- Australian employers cut fewer workers than estimated in May, adding to signs the economy may recover faster than other developed nations.

The number of people employed fell 1,700 from April, when it climbed a revised 25,400, the statistics bureau said in Sydney today. The median estimate of 20 analysts surveyed by Bloomberg News was for a 30,000 decline. The jobless rate rose to 5.7 percent from a revised 5.5 percent.

Australia’s dollar increased on speculation a strengthening economy will prompt central bank Governor Glenn Stevens to raise borrowing costs from a 49-year low. Consumer confidence jumped by the most in 22 years, business sentiment posted the biggest gain since 2001 in May and home loans rose for a seventh month as government stimulus and rate cuts began to revive domestic demand, reports showed this week.

“With the global economy on the mend and recession avoided in Australia, businesses will be back hiring again later this year,” said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney. “Unemployment has hit double digits in countries around the globe, yet in Australia unemployment continues to just creep up.”

The number of full-time jobs dropped 26,200 in May and part-time positions increased 24,500, today’s report showed.

Australia’s unemployment contrasts with the U.S.’s jobless rate, which is at a 25-year high of 9.4 percent, Ireland’s 11.8 percent rate and Spain’s 17.4 percent.

Currency, Shares Rise

The Australian dollar climbed to 81 U.S. cents at 12:40 p.m. in Sydney from 80.49 cents just before the report was released. The two-year government bond yield rose 11 basis points, or 0.11 percentage point, to 4.08 percent.

The benchmark S&P/ASX 200 stock index advanced 0.5 percent to 4,044.10, extending its increase since March 6 to 29 percent. Shares in retailer David Jones Ltd. gained 3.2 percent.

“Once again the employment numbers have continued to defy expectations of carnage in the jobs market,” said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney. “A lot of the anxiety on the economy has dissipated, so employers are saying we’re not going to shed large numbers.”

To spur domestic demand, the government unveiled plans in May to embark on an unprecedented A$22 billion ($18 billion) program to build schools, roads and railways. Reserve Bank of Australia policy makers cut its key rate between September and April by a record 4.25 percentage points to 3 percent.

Rate Expectations

Signs of a pickup in the economy have prompted investors to increase bets that Australia’s benchmark rate will be higher in 12 months, according to a Credit Suisse Group AG index based on swaps trading.

Traders forecast the key rate will be 79 basis points higher in a year, the index showed at 12:16 p.m. in Sydney. Late yesterday they tipped 60 basis points of gains and at the start of June, they tipped 3 basis points of cuts.

A report last week showed Australia joined India and China as one of the few major economies that expanded last quarter. Gross domestic product grew 0.4 percent in the first quarter from the previous three months as consumer spending gained.

Retailer JB Hi-Fi Ltd. raised its earnings forecast this week after opening new stores and boosting sales. It also increased its target for new store openings, with 160 outlets planned compared with its previous forecast of 150.

Germany-based retailer Aldi will spend A$1 billion over the next three years to expand its network of Australian stores to as many as 600 from 205, the Australian Financial Review reported today, citing Managing Director Michael Kloeters.

Job Cuts

In contrast, mining companies such as BHP Billiton Ltd. and Rio Tinto Group that are reliant on overseas demand are reducing production and labor. Rio Tinto has slashed its global spending by more than half to $4 billion this year and BHP shut its $2.2 billion Ravensthorpe nickel mine in Western Australia.

Qantas Airways Ltd., Australia’s largest carrier, said in April it will cut 1,750 jobs as demand for premium travel wanes.

“Australia is experiencing, so far, a smaller downturn than most countries,” Governor Stevens said in a speech on June 4. “The economy will be well placed” to benefit from a global recovery later this year, he added.

The participation rate, which measures the labor force as a percentage of the population aged over 15, rose to 65.5 percent in May from 65.4 percent.

The jobs report “suggests Australian employment is holding up a lot better than forward-looking indicators are suggesting,” said Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne. “It does suggest the fiscal stimulus may be working, particularly in the retail sector, which is Australia’s largest employer.”

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