Massive drop in full-time jobs


Chris Zappone
January 15, 2009 - 11:36AM

The economy lost 44,000 full-time jobs in December as companies reduce payrolls to brace for a possible recession.

The unemployment rate rose to 4.5% from 4.4% in November, as home loans plunge, construction activity falls and business confidence shrivels.

Full-time employment dropped by 44,000 to 7,640,200 while part-time positions soared 42,800 to 3,102,200, bringing the net loss of jobs to 1200.

Economists had expected 20,000 jobs to be shed last month, but the biggest monthly drop in full-time positions since March 2003 came as a surprise.

'Big worry'

"The massive decline in full-time employment, down nearly 44,000 it's a big worry,'' said economist Matt Robinson of Moody's Economy.com. "Even with offsetting force of part time employment.''

"It shows weakness in job security and having their hours cut back.

"It's a real shift in employers' behaviour.''

The labour force shrank by 1100 seasonally adjusted, after a loss of 15,600 positions in November. Economists had expected 20,000 jobs to be shed last month. While 43,900 full-time jobs were cut, 42,800 part-time jobs were created.

The Australian dollar first bounced on the headline employment number but quickly retreated in the face of the steep loss in full-time jobs, losing as much as a quarter of a US cent to 65.76 US cents.

Unemployment to rise

While total employment numbers rose to 10,749,400, economists took the figures as a sign for future bad news.

"The trend is showing employment growth is fading fast,'' said Rob Henderson, chief economist at NabCapital. "Full-time employee growth is deteriorating.

"Labour usage is waning. And unemployment is rising.''

Mr Henderson said NabCapital is looking for unemployment to reach 6% by the end of the year, with a monthly increase of 0.1 to 0.2 percentage points.

Further boost needed

The slumping jobs numbers suggest the Reserve Bank's rate cuts of last year, along with the government's $10.4 billion stimulus package still have some way to go before they kick in, providing the boost needed by consumers and business to keep the economy expanding through a period of sluggishness.

A rising unemployment number puts more pressure on the RBA to cut the interest rate again when it next meets in February, after the central bank already lopped off three full percentage points in the last four months of 2008 in an effort to juice growth.

The market is expecting a 0.75 percentage point rate cut in February to the cash rate, currently at 4.25%, according to Credit Suisse.

More companies cut staff

Yesterday, Ford Credit Australia said it would cut 160 staff as it exited the retail car finance industry. The losses come after retrenchments announced by GE Money and GMAC Australia, ANZ Bank, Qantas, and GM Holden.

The mining sector, too, critical to Australia's growth, has been cutting back workers in recent months. Since November 1400 people have lost their jobs in mining and mining related jobs in Queensland alone.

Rio Tinto has announced 15,000 job cuts worldwide and has postponed mining projects in NSW costing 346 jobs.

While coal miner Xstrata has chopped about 380 workers from over the past two months.