The Australian dollar fell half a cent after Thursday's data showed employment fell 9,700 in August, when analysts had looked for a rise of 11,000. The unemployment rate shifted up to 5.3 percent, from 5.1 percent, while full-time employment dropped 12,600. "It's a pretty soft number," said Stephen Walters, chief economist at JPMorgan.
"The key is whether this is a change of trend and if things are really deteriorating, or if this is just a knee-jerk reaction to all the financial market volatility. That's still a little bit unclear."
The turmoil on global markets in the first half of August hurt business and consumer confidence and could have led to a pause in hiring intentions.
Reserve Bank of Australia (RBA) Governor Glenn Stevens this week noted that it was possible the uncertainty abroad could dampen demand in the economy and so lessen inflationary pressures over time, though it was far too early to tell.
Stevens argued it was best to hold policy steady in such uncertain times, though investors have been wagering the global outlook would darken enough to push the central bank into cutting its 4.75 percent cash rate.
Interbank futures have 72 basis points of easing priced in by Christmas, though that is down from more than 160 basis points back during the height of the turmoil in August.
The jobs result also took some of the shine off Wednesday's gross domestic product report that showed the economy grew a surprisingly strong 1.2 percent last quarter, the fastest pace in four years.
"We think the employment outlook for the medium term is still solid and expect unemployment to trend back lower in 2012," said Spiros Papadopoulos, a senior market economist at National Australia Bank.
"But today's numbers are weak and is just another reason for the RBA to hold rates. The unemployment rate has to go and stay higher than 5.5 percent before it considers rate cuts."
MIGRATION COULD HELP
The fall in jobs in August dragged annual growth in employment down to 1.2 percent, a long way from the peak of 3.6 percent hit last November. Weakness has emerged in a range of once strong hirers, including manufacturing, administration, utilities and construction.
The manufacturing and tourism sectors have blamed a high Australian dollar and foreign competition for hurting sales.
But another reason for the slowdown has been a reduction in the supply of labour as population growth slackened over the last year or so, largely due to government cuts in immigration levels.
Annual population growth had braked to 1.5 percent by the end of last year, well down on the 2008 peak of 2.2 percent and the slowest since 2006. That was mainly because Australia took 35 percent fewer migrants last year, than in 2009.
That led many businesses, particularly in the booming resources sector, to agitate for Australia to accept more migrants to plug a shortage of skilled workers.
And there are signs the government is quietly relenting with recent figures showing net migrant arrivals hitting a 10-month peak of 214,620 in the year to July.
"The good news for Australian businesses is that migrant numbers are recovering from the sharp downturn recorded over 2010," said Craig James, chief economist at CommSec.
He noted that in July alone almost 36,000 people came to Australia to settle permanently or work for a long period.
"These 36,000 people will need accommodation; will go shopping and possibly buy cars, TVs and a range of other consumer products, providing a boost to the economy."
Copyright Reuters, 2010