Australia’s Jobless Rate Climbs as Recession Looms

By Jacob Greber

Jan. 15 (Bloomberg) -- Australia’s unemployment rate rose to the highest in almost two years as mining companies, airlines, and automakers fired full-time workers, adding to signs the economy faces its first recession since 1991.

The jobless rate climbed in December to 4.5 percent from 4.4 percent as full-time employment plunged by 43,900, the statistics bureau said in Sydney today. The total number of people employed dropped 1,200, less than the 20,000 decline forecast in a Bloomberg survey of economists, as retailers hired more part-time workers for the Christmas rush.

Concern that rising unemployment will erode domestic growth may prompt central bank Governor Glenn Stevens to extend the biggest round of interest-rate cuts in almost two decades to boost business and consumer confidence. Rio Tinto Group and Australia & New Zealand Banking Group Ltd. are among companies firing workers amid mounting evidence Australia will follow the U.S., Europe, the U.K. and Japan into a recession.

“The fall in full-time employment is concerning,” said Riki Polygenis, an economist at ANZ Bank in Melbourne. “It means there is a sharper downturn ahead” and will prompt Stevens to reduce interest rates next month.

Australia’s dollar traded at 66.02 U.S. cents at 12:50 p.m. in Sydney from 65.97 cents before the figures were released. The two-year bond yield rose 1 basis point, or 0.01 percentage point, to 2.52 percent.

Part-Time Hiring

The number of part-time jobs increased 42,800 from November, today’s report showed. The Australian Retailers’ Association said this week that shoppers spent A$37 billion ($24 billion) last month after the government started distributing A$8.9 billion in handouts to pensioners and families and encouraged them to spend the cash to support the flagging economy.

“The shift to more part-time hours is because employers likely held on to staff in the expectation of a busy Christmas trading period,” said Benjamin Dinte, an economist at Macquarie Group Ltd. in Sydney. “There is a very large risk that the quantity of job cuts escalates this quarter.”

Governor Stevens and his board reduced the benchmark lending rate last year by three percentage points to a six-year low of 4.25 percent and said last month that monetary policy was now “expansionary.”

Investors have a 100 percent expectation Stevens will cut the overnight cash rate target by three quarters of a percentage point on Feb. 3, according to a Credit Suisse Group index based on swaps trading.

Companies Firing

Rio Tinto, the world’s third-largest mining company, said last month it will eliminate 14,000 jobs globally, reduce capital spending by more than half and sell “significant assets” as demand for metals wanes.

Rio said yesterday it will cut production and slow spending on a A$1.86 billion expansion of its Argyle diamond mine in Western Australia, potentially cutting as many as 200 contract positions.

Export prices for coal and iron ore from Australia, the world’s biggest shipper of the raw material, will drop significantly this year, the Reserve Bank said in a report published today.

China’s appetite for natural resources such as iron ore and copper helped stoke a jobs boom that pushed the unemployment rate to 3.9 percent in February last year, the lowest in more than three decades.

Qantas Airways Ltd., Ford Motor Co., Fairfax Media Ltd., and Telstra Corp. are among companies that have fired workers after gross domestic product expanded just 0.1 percent in the third quarter of last year from the previous three months, the weakest pace since 2000.

Worse to Come

“The 4.5 percent unemployment rate is probably a good outcome,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “We are in store for a further deterioration in the labor market, characterized by fewer jobs for new entrants rather than en masse job destruction.”

Advertisements for job vacancies slumped for an eighth month in December to levels indicating the economy will enter a recession in the next nine months, according to an ANZ Bank report published on Jan. 12.

The participation rate, which measures the labor force as a percentage of the population aged over 15, fell to 65 percent in December from 65.1 percent, today’s report showed.

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