Australia unemployment set to climb as world slows

SYDNEY, Nov 7 - Australia's unemployment rate is likely to rise by over 2 full percentage points by 2010 as a gathering global recession wipes out six years of job gains, a survey of analysts found on Friday. Up to now, the labour market has been surprisingly resilient, with data out this week showing 34,200 new jobs created in October even at the height of a global market meltdown.

The jobless rate held at 4.3 percent, not far from 30-year lows of 3.9 percent touched back in February.

But with consumer and business spending withering, all the leading indicators of employment, such as vacancies and job advertisements, point to weakness ahead.

"Labour data is a lagging indicator of the economy," said Joshua Williamson, senior economist at TD Securities. "That lag may have increased, but ultimately the labour force will not escape the grip of a slowing economy and the global financial crisis."

He looked for the unemployment rate to begin a steady rise throughout 2009 to a year-end high of 6.3 percent.

A Reuters poll of 15 analysts produced a median forecast that unemployment would peak at 6.5 percent, a level last seen in June 2002, likely late next year or in 2010.

Historically, that would still be a respectable performance given that during the last major recession in the early 1990's, unemployment hit a peak of 10.9 percent.

It would also compare well with the United States, which is expected to report later on Friday that the jobless rate had already reached 6.3 percent in October.

Australia's Labor government is a little more optimistic and even after revising up its unemployment forecasts this week, still sees a relatively low reading of 5.75 percent by mid-2010.

They may be counting on the phenomenon of labour hoarding.

"This fits with our long-held view that employers would initially be reluctant to shed labour after having extreme difficulty during the upswing securing skilled labour," said Anthony Thompson, a senior economist at Westpac.

"However, our preferred leading indicators continue to point to a steepening of the labour market deterioration through 2009," he added.

He expects annual jobs growth to slow to around 0.5 percent next year, lifting the unemployment rate to 5.7 percent by the end of 2009, before peaking around 6.2 percent in 2010.

Far gloomier was Stephen Walters, chief economist at JPMorgan. He argued that the grimmer global economic outlook coupled with difficulty attaining financing, would lead to a sharp cutback in business investment, particularly in the once red-hot mining sector.

That would contribute to employment falling by around 1 percent, a more benign outcome than during past recessions, when the drop was closer to 3 percent.

However, labour force participation would likely continue to rise as second income earners return to the labour force to make ends meet, along with anxious investors who have watched the value of their retirement nest eggs subside.

"On this basis, a modest 1 percent drop in employment should be sufficient to push the unemployment rate up to 9 percent by the end of 2010," warned Walters. --------------------------------------------------------------- Analysts were asked where unemployment would peak this cycle and when that high would come? ---------------------------------------------------------------

Jobless When

peak pct AMP 6.8 Dec 2009 ANZ 6.5 Late 2010 Citi 6.5 Jan 2010 CBA 5.4 H2 2009 4Cast 9.5 Q3 2010 GSJBW 6.5 Q4 2009 ICAP 6.25 Q4 2009 JP Morgan 9.0 End 2010 Macquarie 6.5 Q2 2010 NAB 6.5 Dec 2010 Nomura 6.5 March 2010 RBC 6.25 Q1 2010 St George 8.0 H2 2010 TDSec 6.3 End 2009 UBS 5.5 Q4 2009 Westpac 6.2 2010 --------------------------------------------------------------- Low 5.4 High 9.5 Average 6.8 Median 6.5 ---------------------------------------------------------------