Australian Employers Unexpectedly Add 32,200 Workers

By Jacob Greber

Aug. 6 (Bloomberg) -- Australian employers unexpectedly added workers in July, driving up the nation’s currency on speculation the central bank will raise borrowing costs by the end of the year.

The number of people employed rose 32,200 from June, the statistics bureau said in Sydney today. The median estimate of 18 economists surveyed by Bloomberg was for a decline of 18,000. The jobless rate held at 5.8 percent.

Central bank Governor Glenn Stevens kept the benchmark interest rate at a half-century low of 3 percent this week for a fourth month and signaled his next move may be an increase, saying the economy is “stronger than expected a few months ago.” Woolworths Ltd., the nation’s largest retailer, is among companies hiring to meet demand amid rising consumer confidence.

“It’s another sign of resilience and employers holding on to labor, so it provides some confidence in the future,” said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney. The next move for interest rates “will be up.”

The Australian dollar rose to 84.43 U.S. cents at 12:17 p.m. in Sydney, close to its highest in more than 10 months, from 84.26 cents just before the report was released. The two-year government bond yield jumped 5 basis points to 4.45 percent. A basis point is 0.01 percentage point.

Interest-rate contracts on the Sydney Futures Exchange show about an 80 percent chance the Reserve Bank of Australia will increase borrowing costs in November by a quarter percentage point.

Part-time Jobs

Part-time employment increased 48,200 and the number of full-time jobs dropped 16,000 in July, today’s report showed.

The bureau of statistics also released figures today for the first time measuring aggregate monthly hours worked, which fell 0.43 percent in July to 1.52 billion hours. Hours worked peaked in June 2008 at 1.55 billion hours, the report said.

“It’s clear that Australia’s economists need to spend more time on the road listening to businesses than crunching numbers in their ivory towers,” said Craig James, a senior economist at Commonwealth Bank of Australia. “Businesses have been consistently saying that they are not shedding staff, but rather cutting hours” and moving people to part-time jobs.

While steady in Australia, unemployment is rising around the world amid the deepest global recession since the Great Depression. Japan’s jobless rate reached a six-year high of 5.4 percent in June and the U.S. rate climbed to 9.5 percent, the worst since 1983. A report today showed New Zealand’s rate jumped in the second quarter to a nine-year high of 6 percent.

Economic Growth

Australia’s economy has so far outperformed most other developed nations, expanding 0.4 percent in the first quarter, as A$12 billion ($10.1 billion) in government handouts to households boosted consumer spending, which accounts for about 60 percent of gross domestic product. The central bank also cut its benchmark interest rate by a record 4.25 percentage points between September and April.

Rising consumer and business confidence “suggests the risk of a severe contraction in the Australian economy has abated,” Governor Stevens said on Aug. 4.

A Westpac Banking Corp. index of consumer confidence jumped in July to the highest level in 19 months.

Woolworths said last month that sales in the three months ended June 28 rose 5.4 percent on demand at supermarkets.

Still, there are signs that interest-rate cuts and government spending are having less impact. Retail sales unexpectedly tumbled 1.4 percent in June, the first drop since February, when Prime Minister Kevin Rudd announced a plan to distribute individual cash payments of as much as A$900 to low and medium income earners.

Services Industry

A separate report published yesterday showed Australia’s services industry contracted in July, after expanding in June for the first time in 15 months, as households cut spending at hotels, cafes and restaurants.

Today’s figures show the “economic stimulus is working to support jobs,” Deputy Prime Minister Julia Gillard told reporters in Melbourne. Still, it’s “far too soon to contemplate pulling the rug out from the Australian economy” by cutting government spending.

Mark McInnes, chief executive officer of David Jones Ltd., the nation’s second-biggest department-store chain, said yesterday while there was a positive turnaround in trading during the June quarter, “there is still some uncertainty in relation to the future outlook.”

Retailers such as David Jones employ more than one in ten Australian workers, according to government figures.

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

Labor-market resilience “may reflect greater flexibility compared with the last downturn in 2001 and the recession of the early 1990s,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney.

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