Australian Unemployment Drops to Four-Year Low, Currency Surges

• Australian Unemployment Drops to Four-Year Low, Currency Surges

Australian employment surged in May, led by a rebound in full-time positions, sending the jobless rate to the lowest level in more than four years. The currency surged.

• Employment jumped 42,000 from April, when it climbed an upwardly revised 46,100; economists forecast 10,000 gain
• Jobless rate fell to 5.5%, the lowest since Feb. 2013; estimate 5.7%
• Full-time jobs rose by 52,100; part-time employment fell 10,100
• Participation rate increased to 64.9% from 64.8%; forecast was 64.8%
• Aussie dollar jumped to 76.18 U.S. cents at 12:17 p.m. in Sydney, compared with 75.89 cents prior to report

Big Picture

Three straight months of strong job gains signal Australia’s labor market may be exiting a slow grind that’s been characterized by stagnant wages and fewer hours. The economy is adjusting to the end of a resource boom and the central bank has cut its benchmark rate to a record-low 1.5 percent in order to encourage firms to borrow and hire. The result follows a private report Tuesday showing business conditions remain strong.

Economist Takeaways

“The much stronger-than-anticipated rise in employment in May and the larger-than-expected fall in the unemployment rate will go some way to quashing growing talk of the chance of another interest rate cut by the RBA later this year,” said Kate Hickie at Capital Economics. But the underutilization rate “is still fairly elevated by recent standards.”

“One strong economic result is viewed with suspicion. Two strong results are viewed with cautious optimism. Three strong job results are viewed as confirmation of a very positive trend,” said Craig James at the securities unit of Commonwealth Bank of Australia. “The Reserve Bank certainly won’t be in a rush to lift rates. But rate cuts can now be taken off the table.”

Other Details

• New South Wales, the most populous state, led gains with 32,600 jobs, followed by the southeastern state of Victoria with 6,900
• The mining powerhouses of Western Australia and Queensland recorded declines in unemployment to 5.5% and 6.1% respectively
• Australia added 141,100 jobs in the three months through May, the biggest such gain since 2004
• Hours worked rose by 1.9%, the biggest increase in 11 years
• The underemployment rate declined 0.1 percentage point to 8.8%; the underutilization rate fell 0.4 point to 14.4%