May’s job losses went from a ‘surprise’ in early reports yesterday, to a ‘shock’ in the afternoon as business economists recovered their poise and wondered why their estimates of job gains of an average 13,500, were so far wide of the mark.
Figures from the Australian Bureau of Statistics revealed 19,500 jobs were lost last month, the first time that has happened since October 2006.
The news came as a complete surprise to many, but there was the odd analyst who wasn’t that taken aback: after all business surveys have been showing softening demand for jobs for several months now and it was inevitable that move would show up eventually in the ABS figures.
But economists had no real answers and with full time employment and part time work shedding jobs in roughly even proportions, there was further confusion for some analysts who said part time jobs were usually the first to go in a slowdown.
And when job losses in NSW and Western Australia were revealed as the main drivers, against a strong jobs gain in Victoria, there was added confusion.
But with the WA gas crisis yet to hit home in the West and cut employment (it will by the end of this month) we face a couple more months of surprises. Job losses from WA will rise because of the slowdown and the loss of energy supplies to a growing number of export and domestic businesses.
The soaring oil price should be considered an underlying factor: anecdotal stories claim there have been small layoffs in some businesses servicing the car industry and service stations because fuel use is falling.
But one thing can be said with certainty: the Reserve Bank’s campaign to slow the Australian economy and inflation is working, with the first loss of jobs for 19 months being recorded in May.
News of the surprise jobs loss saw the Aussie dollar lose three quarters of a cent as it plunged through 94 USc to end around 93.85. The dollar eased further overnight and ended at 93.40 US cents.
Financial markets odds of another rate rise this year also dropped and there’s no chance of a rate rise when the RBA meets next in early July.
The news comes on top of falling or static retail sales, plunging home loan and building approvals and means the chances of another rate rise have been put off until much later in the year, if at all.
In fact it emphasizes that the central bank, Wayne Swan and Kevin Rudd got their anti-inflation rhetoric about right earlier in the year, especially with the rate rises in February and March.
The Reserve Bank now has a bit more room to change tack and to resist any calls to boost rates when the June quarter CPI is released in late July.
The latest figures echo Tuesday’s National Australia Bank’s monthly business conditions survey which showed that employers were starting to question the need for new employees: and that proved to be accurate.
The figures also support the trend showing up in the ANZ job ads series which have been three negative months in the first five months of the year, with a sharp loss of job ads in newspapers. Internet advertising is down, but remains strong, up 9.5% on a year ago.
The ABS said that the number of people employed "decreased by 19,700 to 10,691,200. Full-time employment decreased by 10,400 to 7,645,200 and part-time employment decreased by 9,300 to 3,046,000".
With the loss of jobs evenly spread across both full-time and part time employment, it’s clear companies are making small trims and cutting back on new hiring.
The ABS said remained steady at 476,700 and the number of people looking for full-time work fell 17,900 to 317,700 and the number of persons looking for part-time work increased by 18,000 to 159,000. The unemployment rate remained steady at 4.3%.
The biggest loss of jobs came in NSW, which shed a seasonally adjusted 17,300 jobs last month, raising the unemployment rate to 4.7% from 4.5%.
In Victoria, the economy gained 5,600 jobs, dragging the unemployment rate down to 4.3% from 4.6%.
The biggest surprise of all was the loss of 400 jobs in Western Australia, the state with the fastest growing economy thanks to the resources boom. The job losses raised the state’s unemployment rate to 3.7% from 3.4%.
Perversely, the loss of jobs is ‘good’ news for the markets as it lessens the chance of another rate rise and should instill some optimism, especially as the Reserve Bank has got it right.
But markets were nervy for the second time this week as Asian and European markets reached to oil prices moving back past $US136 a barrel and local worries about the health of the financial sector, especially investment bank, Babcock and Brown.
The stockmarket fell by over 2% for the second time this week: taking the losses to close to $65 billion. Financial stocks were weak, resources stocks were mostly sold off, with the exception of oil shares which rose as world oil prices moved back towards $US140 a barrel.
The market closed sharply lower with the ASX200 index falling 138.1 points, or 2.53%, to 5329.2 and the All Ordinaries losing 128.7 points, or 2.31%, to 5433.2. Both are two month lows.
