Australia's unemployment rate jumped by more than expected in January from nine-month lows, knocking the local currency to an 11-year low and bolstering expectations of further monetary policy stimulus. The Australian Bureau of Statistics (ABS) data showed 13,500 net new jobs were created in January, beating forecasts of 10,000 and following a surprisingly strong 28,700 December gain.
The increase was driven by full-time work, which surged 46,200 while part-time jobs fell by 32,700. However, the unemployment rate jumped to 5.3% as more people went looking for work. The 5.1% recorded in December was the lowest reading since March 2019.
The underutilisation rate, a gauge of labour market spare capacity, climbed to a 19-month high as the participation rate rose to 66.1%. In response, the Australian dollar plunged to $0.6650, its lowest since March 2009.
While the composition of the job increase was encouraging, the spike in the unemployment rate together with data released on Wednesday showing tepid wage growth made a case for more stimulus. "We expect the labour market will lose some momentum in 2020, with employment growth slowing to less than 2%," said Sean Langcake, senior economist at BIS Oxford Economics.
"This will make it challenging to work through existing spare capacity, and we expect the RBA will cut rates in the first half of the year to aid this transition." The Reserve Bank of Australia (RBA) has long argued unemployment needs to fall to at least 4.5% to deliver a desperately-needed lift in wage growth, which has been stuck around 2.3% for a year or more.
That was a major reason it cut its benchmark rate three times last year to a record low of 0.75%. It held rates at its first meeting of the year this month, saying it was "carefully" monitoring the employment sector. Investors believe the RBA will stay patient for some while yet.