The unemployment rate is steady after the economy added more than 70,000 jobs in February. Photo: AFR
Employment soared by 71,500 in February, far above any forecast and the biggest increase in over a decade, the most compelling sign yet that low rates and rising asset prices are fuelling an economic pick-up.
The dollar and bond yields jumped on the startlingly strong figures, which were seen as almost ruling out any cut in interest rates before the middle of the year.
"It's spectacular employment growth," said Macquarie senior economist Brian Redican.
Full-time jobs rose 17,800 in February while part-time employment climbed 53,700, data from the Bureau of Statistics showed. Forecasts were for only 10,000 new jobs in the month.
The jump helped keep the jobless rate steady at 5.4 per cent even though the participation rate rose to 65.3 per cent, from 65 per cent.
A rise in participation is often a sign of an improving economy as people feel encouraged enough to look for work.
"With that kind of employment growth, obviously [RBA] policy makers would be feeling pretty comfortable with the current policy settings," Mr Redican said.
The Australian dollar jumped to a one-month high after the release. The Aussie added about half a US cent to $US1.0357, suggesting investors were lowering their expectations of further rates cuts in the months ahead.
Financial markets were pricing in only a 4 per cent chance of a 25-basis-points rate cut at the April meeting, a fall from 16 per cent before the data release, and a 32 per cent chance of a 25-basis-point cut in the year ahead.
The unemployment rate in NSW rose slightly to 5.2 per cent in February as the participation rate lifted to a seasonally adjusted 63.8 per cent.
In Victoria, unemployment fell sharply from 6.1 per cent in January to 5.5 per cent last month, as the particpation rate rose to 65 per cent.
In contrast, Queensland saw a 0.3 per cent rise in the unemployment rate to 5.8 per cent, while the participation rate remained level at 66.2 per cent.
In South Australia, the unemployment rate slid down to 5.8 per cent from 6.1 per cent in January, with the participation rate dropping to 62.8 per cent.
Western Australia registered a 0.4 per cent lift in the unemployment rate to 4.5 per cent as participation rates remained steady at 68.9 per cent.
The unemployment rate in Tasmania slid to 6.6 per cent from 7.7 per cent in January as the participation lifted by 0.5 per cent to 60.5 per cent.
The ACT unemployment rate increased from 4.5 to 4.6 per cent in trend terms. There was no change in the number of people with jobs, but population growth effectively meant there were 200 more people in the workforce who were regarded as unemployed.
Rough spot behind us
Deutsche Bank chief economist Adam Boyton said the report showed the Australian economy was probably through its worst patch.
But he cautioned that month-to-month employment numbers were "very noisy and volatile" and a few more months of data was needed to get an accurate read on how decisive the turn in the labour market was.
"There’s some noise in the survey, and that’s reflected in the rise in employment but also the rise in the participation rate. Beneath all of that, there appears to have been a strong group rotate into the survey that had a higher propensity to be employed than the group that rotated out," Mr Boyton said.
"I think the fact that the unemployment rate is unchanged suggest that the detail of the data isn’t quite as rosy as that 71,500 increase in employment would suggest."
BT Financial Group chief economist Chris Caton said the report was good, although he cautioned the jobs increase was partly fuelled by an increase in part-time roles for men.
"So there’s some suspicion attached to it, but when you look at this [report], you can’t interpret this as anything other than a good report," Mr Caton said.
"If you looked at past months’ data, it all looked a bit weak - it looked like we had employment growing at less than 1 per cent a year. This now puts the year-to growth at 1.7 per cent, which is a lot more respectable."
Recent job cut announcements has kept unemployment in the spotlight. On Monday, building products maker CSR said it was axing 150 jobs, joining other companies such as BlueScope and Boral, which earlier this year announced job losses as part of their cost-cutting programs.
Unemployment rate (per cent, seasonally adjusted)
- February: 5.4 per cent
- January: 5.4
- December 2012: 5.4
- November: 5.3
- October: 5.4
- September: 5.4
- August: 5.1
- July: 5.2
New jobs added
- February: 71,500
- January: 10,400
- December: -5500
- November: 13,900
- October: 10,700
- September: 14,500
- August: -8800
with agencies and David McLennan