Australian Employers Unexpectedly Hire Extra Workers

By Jacob Greber

Nov. 6 (Bloomberg) -- Australian employment unexpectedly surged in October by the most in six months, a sign lower interest rates, government handouts and exports may help the economy sidestep a global recession.

The number of people employed gained 34,300, driven by a jump in part-time jobs, after dropping a revised 3,300 in September, the statistics bureau said in Sydney today. The jobless rate held at 4.3 percent as more people looked for work.

Shipments of natural resources such as coal and iron ore, which helped boost the nation's trade surplus in September, may underpin economic growth even as the U.S., the U.K. and Japan are threatened by recessions. Reserve Bank Governor Glenn Stevens has cut borrowing costs by 2 percentage points since early September in the most aggressive round of rate reductions since the economy was last in a recession in 1991.

``The strong jobs result will silence the doomsayers, at least for now,'' said Craig James, a senior economist at Commonwealth Bank of Australia in Sydney, who was one of only two analysts to tip the increase in a Bloomberg survey.

``It is a great shot in the arm for the economy. More jobs have been created, meaning there are more people with money to spend.''

The government is trying to stoke consumer spending by giving pensioners, home buyers and families A$10.4 billion ($7 billion) in handouts. The payments are in addition to the biggest income-tax cuts in history, which took effect in July and will add A$5.1 billion to consumer spending in the 12 months through June 2009.

Interest Rates

In another boost, Stevens and his board cut the benchmark interest rate by three quarters of a percentage point this week to a 3 1/2-year low of 5.25 percent, adding to a 1 percentage point reduction in October and a quarter-point adjustment in September.

The number of full-time jobs declined 9,200 in October, the second straight monthly drop. Part-time employment increased 43,500 from September, today's report showed.

The median estimate of the 14 economists surveyed by Bloomberg News was for a decline of 10,000 jobs.

``The unexpectedly strong report reminds us of the strength of the Australian economy compared with North America and Europe, but it's also misleading,'' said John Edwards, chief economist at HSBC Bank Australia Ltd. in Sydney.

Falling retail sales, building approvals, slower credit growth and waning consumer and business confidence ``are more contemporary signals of the Australian economic slowdown,'' Edwards added.

Companies Firing

The Australian dollar traded at 67.60 U.S. cents at 12:27 p.m. in Sydney from 67.62 cents before the report was released. The two-year government bond yield gained 2 basis points, or 0.02 percentage point, to 3.89 percent.

The employment gains may be reversed after companies including Fairfax Media Ltd., Boeing Co., Ford Motor Co., Starbucks Corp. and ANZ Bank recently announced job cuts. Qantas Airways Ltd., the nation's biggest airline, will fire 1,500 workers.

Jobs vacancies advertised in newspapers and on the Internet plunged 5.9 percent in October, the biggest drop since February 2001, according to an Australia & New Zealand Banking Group Ltd. report this week.

The government yesterday predicted the unemployment rate will rise to 5 percent by the June quarter of 2009 and 5.75 percent the following year as fallout from the global financial crisis buffets the economy.

Growth Slowing

Treasurer Wayne Swan said economic growth will slow to 2 percent in the year through June 2009, which would be the weakest expansion in eight years.

Reports this week showed house prices fell by the most since 1978, building approvals had the biggest drop in two years and retail sales contracted at the fastest pace since 2005.

``Global economic conditions have changed dramatically in recent months as the global financial crisis has entered a dangerous new phase,'' Swan, 54, said yesterday.

The participation rate, which measures the labor force as a percentage of the population aged over 15, rose to 65.3 percent from 65.1 percent, today's figures showed.

The unemployment report was compiled by the statistics bureau using a sample of businesses that was reduced by 24 percent in July. The bureau, which reduced the survey because of budget cuts, has said that will increase the volatility of the figures.

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