Australian Employment Rises 10,900 on Mining Boom

By Jacob Greber

Aug. 7 (Bloomberg) -- Australian employers hired extra workers for a second month in July amid expansion by mining companies that has underpinned economic growth as domestic demand slows.

The number of people employed rose 10,900 last month, after climbing a revised 22,200 in June, the statistics bureau said in Sydney today. The median estimate of 24 economists surveyed by Bloomberg News was for a 5,000 increase. The jobless rate held at 4.3 percent.

Australia's resources boom is increasingly being tempered by slumping consumer spending that has prompted retailers and airlines to shed staff. Reserve Bank Governor Glenn Stevens left borrowing costs unchanged this week, saying the bank may cut rates for the first time in seven years as economic growth slows and demand for labor weakens.

``This is consistent with a gradual easing of the Labor market,'' said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. ``The Reserve Bank will probably reduce rates in September, starting an easing campaign that will cut 100 basis points in the next six months.''

The Australian dollar rose to 91.15 U.S. cents at 12:50 p.m. in Sydney from 90.82 cents immediately before the report. The yield on the two-year government bond was unchanged at 5.98 percent.

The number of full-time positions increased 53,700 in July and part-time jobs dropped 42,800, today's report showed. About half of the nation's 21 million people are employed.

Resources Boom

A decline in jobs in May ended a record 18 consecutive months of gains. The unemployment rate reached 3.9 percent in February, the lowest in more than three decades.

Rising Chinese and Indian demand for commodities is prompting mining companies including Rio Tinto Group to expand and hire workers. Exports climbed to a record A$23 billion ($21 billion) in June.

Australia, the world's largest shipper of coal, iron ore and wool, will report a 20 percent surge in its terms of trade this year, according to the government. The terms of trade measures export income.

BHP Billiton, the world's largest mining company, approved a $1.9 billion expansion in May of its Worsley alumina project in Western Australia. Rio Tinto plans to boost output by 26 percent at its Queensland Alumina Ltd. refinery.

Mining Jobs

In Western Australia the jobless rate fell to 3.1 percent from 3.2 percent, and slid to 3.7 percent from 3.8 percent in Queensland, today's report shows. The two states are the nation's main mining regions.

In contrast, unemployment climbed in the most populous state, New South Wales, to 4.7 percent from 4.6 percent.

While mining companies continue to expand, companies that rely on consumer spending have started to shed staff. Qantas Airways Ltd., Australia's largest airline, said last month it will fire 1,500 workers. Meat processing company Don Smallgoods will cut 640 jobs at factories in Perth and Melbourne.

Starbucks Corp., the world's largest chain of coffee shops, said July 29 it will close three-quarters of its 84 Australian stores, part of a plan to cut 12,000 jobs globally.

Job-vacancy advertisements fell for a third month in July, adding to signs employers will pare hiring as growth slows.

``The closures and layoffs at Starbucks and a few other companies are likely to be a sign of things to come,'' said Shane Oliver, senior economist at AMP Capital Investors in Sydney. The unemployment rate will climb ``up above 5 percent by June next year,'' he added.

Interest Rates

The Reserve Bank of Australia left the benchmark rate unchanged for a fifth month on Aug. 5. Policy makers raised the rate to a 12-year high of 7.25 percent in March to cool consumer prices that rose to 4.5 percent in the second quarter.

The bank aims to keep inflation between 2 percent and 3 percent on average.

Consumer confidence slumped in July to the lowest level in 16 years and home-loan approvals tumbled in June to a four-year low, recent reports show. House prices fell in the second quarter for the first time in almost three years.

``With demand slowing, the board's view is that scope to move towards a less restrictive stance of monetary policy in the period ahead is increasing,'' Stevens said on Aug. 5.

The economy grew at the weakest pace in almost two years in the second quarter.

Investors have boosted bets the central bank will lower borrowing costs next month, according to a Credit Suisse Group index based on trading in interest-rate swaps. The index signals a 100 percent chance of a quarter-point cut when policy makers next meet on Sept. 3.

The participation rate, which measures the labor force as a percentage of the population aged over 15, remained at 65.3 percent in July, today's report showed.

Today's jobs report is the first to be based on a reduced sample size after the government cut the statistics bureau's funding. The sample size was decreased by 24 percent to 41,100 employers in the July survey.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net