Expectations for Australia‘s March employment expectations were quite modest. Analysts were bracing to see job losses somewhere around 6,700 following the whopping monthly increase in the labor force of 74,000 in February. The unemployment rate was eyed to remain steady at 5.4%.
Boy, were we in for a big surprise!
The actual data showed a much, much bigger decline in jobs than what analysts had estimated, coming in at 36,100. It actually translates to the largest monthly drop in 10 years! A big chunk of the decline was in part-time jobs which were down 28,700 for the month. Meanwhile, 7,400 full-time jobs were lost.
The participation rate, which measures the number of workers in relation to the rest of the population, was also lower at 65.1% versus the 65.3% reading we saw for February.
The biggest upset in the report though, was the spike in the unemployment rate. It had been holding steady at 5.4% from December 2012 to February 2013. But the drop in jobs in March caused it to increase its highest reading since November 2009 at 5.6%!
The poor employment figures are a major punch to the gut of Prime Minister Julia Gillard’s Labor Party. Keep in mind that Australia will be hosting elections this coming September and with the party already lagging behind in the polls, any poor data definitely doesn’t help them maintain control of the government.
The employment report also supports the Reserve Bank of Australia‘s cautious stance on the economy. Some experts believe that the report could give the RBA one more reason to slash rates by 25 basis points, bringing them down to 2.75%.
Of course, we all know that a rate cut could lead to potential Aussie weakness. As it is, AUD/USD has already retraced a bit of its gains after looking like it was headed straight for 1.0600. After this week’s employment report though, I’m not quite sure the bulls will have enough juice to keep on climbing.
So is the employment report really all that bad?
For all we know, March could be nothing more than a technical pullback. Take note that in February, Australia registered its largest one month increase of 74,000 jobs.
Moreover, the economy is in the process of rebalancing the employment pie, which used to be heavily skewed towards the mining sector. With the economy now trying to focus on pumping up employment in other sectors, it’s only normal that we should see some degree of adjustment take place.
Lastly, this may end up being a one-month aberration. Remember, one month does not make a trend! We will have to keep monitoring the Australian employment situation over the next couple of months before we can definitely say that the labor market is in serious trouble.