Interpac Business and Migration Solutions Melbourne Australia

February 11, 2010

The Australian labour market has stunned economists for a third straight month, with more than 50,000 new jobs created in January.

The official ABS survey showed a seasonally adjusted unemployment rate of 5.3 per cent, with 52,700 more people employed, although only 15,900 of those extra jobs were full-time.

The increasing prevalence of part-time work was reflected in a modest 1 per cent fall in the number of hours worked, despite the increase in the number of jobs.

The consensus economist forecast had been for a small up tick in the unemployment rate to 5.6 per cent, despite the predicted creation of 15,000 jobs.

20,000 more jobs were created than even the most optimistic forecast among 21 economists surveyed by Bloomberg.

"It has caught us a little by surprise," RBC's senior economist Su-Lin Ong told ABC News Online. She was expecting a fall of 5,000 jobs in January.

"We've had a run of very strong numbers for employment for several months now, and the risk was for some correction, a modest pull-back."

The previous two months' unemployment figures had also surprised economists with a much larger than expected number of jobs created, forcing the unemployment rate down to 5.5 per cent in December.

'Well and truly peaked'

That had already led many analysts to predict that the unemployment rate peaked in 2009 at 5.8 per cent, and today's figures have served to strengthen that view.

"There's no doubt in my mind that the unemployment rate has well and truly peaked, and well below 6 per cent at that," Su-Lin Ong added.

"From trough to peak, we've barely had a 2 percentage point rise in the unemployment rate this cycle, it's a much stronger labour market than we all thought, and that has important knock-on effects to the rest of the economy."

She says that will put increasing pressure on the Reserve Bank to lift interest rates again soon to counter wage pressures from higher employment levels.

The Commonwealth Bank's chief economist, Michael Blythe, agrees that this month's figures confirm that unemployment has peaked, and increase the chances the Reserve will raise rates in March.

"An exceptionally strong number, one that confirms that unemployment has peaked and is starting to decline at a fairly rapid pace. We are not too far off what the experts tell us is full employment at the moment and it definitely starts to raise the issue of inflation risks building down the track," he told Reuters.

"Market scepticism about imminent RBA rate rises has disappeared and it's now better than a 50-50 proposition that rates will go up in March and, at the very least, these numbers say that the pause we've seen on the rates front will be short."

The increased prospect of more interest rate rises helped the Australian dollar surge from 87.70 US cents just before the release to a high of 88.63 US cents soon afterwards.

Youth unemployment remains high

The youth full-time unemployment rate in January remained high at 24 per cent, and more than 65,000 Australians between 15 and 19 years old were unable to find full-time work.

That is down from a peak of almost 79,000 in July last year, but still well above the average across all age groups.

The jobless rate for the states and territories either fell or remained steady, with the ACT the only one to buck the trend with a slight rise in unemployment.

• South Australia's unemployment rate has fallen from 5.2 to 4.4 per cent in seasonally adjusted terms. The number of people looking for work has risen.
• Queensland's unemployment rate has fallen from 5.9 to 5.5 per cent in seasonally adjusted terms. The number of people looking for work has fallen.
• New South Wales' unemployment rate has fallen from 5.9 per cent to 5.6 per cent in seasonally adjusted terms. The number of people looking for work has fallen slightly.
• Western Australia's unemployment rate has fallen from 5.1 per cent to 5 per cent in seasonally adjusted terms. The number of people looking for work has fallen slightly.
• The Northern Territory's unemployment rate has fallen from 3.4 to 3.3 per cent in trend terms. The number of people looking for work has risen.
• Victoria's unemployment rate is steady at 5.3 per cent in seasonally adjusted terms. The number of people looking for work has risen.
• Tasmania's unemployment rate is steady at 5.4 per cent in trend terms. In seasonally adjusted terms, the jobless rate is unchanged at 5.2 per cent.
• The ACT's unemployment rate has risen from 3.7 to 3.8 per cent in trend terms. The number of people looking for work has risen slightly.

(Source from ABCNews.com.au)