Unemployment falls by 0.1%, Shares jump: Economy Roundup

The Australian unemployment rate fell by a higher-than-expected 0.1% to 5.5% in December, according to the latest labour figures from the Australian Bureau of Statistics, with employment now reaching a record high.

The unexpected result is likely to force the Reserve Bank of Australia to lift interest rates for a fourth consecutive time when it meets during the first week of February.

The figures show a 0.1% drop in unemployment to 5.5%, with the participation rate remaining at a steady 65.2%. The number of people unemployed fell by a seasonally adjusted 10,600 to 639,400.

Employment rose by 35,200, with 7,300 of those in full-time employment and 27,900 gaining part-time employment.

The figures come after a Reuters poll predicted a rise in employment of 10,000, with the expectation of the unemployment rate to remain at 5.7% and the participation rate moving upward to 65.3%.

CommSec chief economist Craig James said in a statement the result was unexpected, and Australians now have “reason to celebrate”.

“It should now be clear to all and sundry that the unemployment rate has peaked. Not only has unemployment fallen for two straight months, but the data on job ads show that employers are actively hiring new workers.”

“All Australians have reason to celebrate the fact that there are more people employed than ever before with almost 11 million Aussies holding jobs.”

James said while the job market may not be at full health, the economy is currently reaching the full-employment rate of about 5%.

“Earlier this week the sharp rebound in the ANZ job advertisements survey confirmed that employers are hiring again – a result that should ensure that the unemployment rate should continue to track lower in coming months.”

“Importantly the improvement in job security will not be lost on consumers. Less fear about losing their jobs will no doubt see a pickup in retail spending and overall economic activity – in effect a self-fulfilling prophecy and clearly another reason why the Reserve Bank will gradually remove the monetary stimulus currently in play.”

Shares higher after Wall Street hits 15-month high

The Australian sharemarket has opened higher today after stocks rose on Wall Street, with investors expecting good fourth quarter results from a number of technology and finance companies.

The benchmark S&P/ASX200 index was up 43 points or 1.89% to 4911.3 at 12.10 AEST, while the Australian dollar remained steady at about US92c.

Commonwealth Bank shares rose 1.1% to $56.63, while Westpac shares also gained 1% to $25.34. NAB shares rose 0.9% to $27.07, as ANZ gained 0.3% to $22.37.

As reported in the Herald Sun, the Commonwealth Bank of Australia is now finalising an alliance with an Asian bank involving at least $100 million in an initial investment.

“The bank is looking at several opportunities in Indonesia at the moment where, unlike most other Asian markets, foreign banks are able to fully own banks operating in the country,” a source says.

Also, chairman John Schubert has told the Australian Financial Review that bank executives will be driven to “look-alike” companies in order to avoid new regulations reducing cash payments to executives.

“The more deferral, the more pay is discounted in the eyes of executives,” he said. “We are going to have the development of look-alike banks… The problem is that people move to be always just outside [the regulated sector].”

Meanwhile, Fitch Ratings has welcomed proposed changes to Australian prudential liquidity laws, and has said asset quality will deteriorate as households become pressured due to rising unemployment.

“Asset quality in consumer loan portfolios will likely weaken as unemployment rises and interest rates increase,” Fitch said in a report released today. It also said it expects the Australian unemployment rate to rise from 5.7% in November to 6.1% during 2010.

It warned the current unemployment level does not take into account underemployment, which is caused by reduced working hours instead of redundancies.

News Corp. announces Fox restructure

Overseas, News Corporation has announced it will restructure its Fox network entertainment and sports operations in order to help it grow over the next few years.

“This reorganisation is not targeted at short-term change, but at maintaining our momentum while better aligning us in key content areas for long-term growth as we take these businesses to new heights over the coming years,” News Corp deputy chairman, president and chief operating officer Chase Carey said in a statement.

All the network’s sports operations will now come under the supervision of Fox Sports chairman David Hill.

Additionally, the first public hearing of the Financial Crisis Inquiry Commission was held in Washington with former California state treasurer Phil Angelides confronting Goldman Sachs chief executive Lloyd Blankfein.

Angelides said Goldman’s practices of betting against subprime mortgages was akin to “selling a car with faulty brakes and then buying an insurance policy on the buyer.”

While Blankfein said there was demand for the products, comparing the financial crisis to hurricanes. Angelides replied, “Having sat on the board of the California Earthquake Authority, acts of God will be exempt. These were acts of men and women.”

In New York, the Dow Jones Industrial Average hit a new 15-month high, with stocks moving up 53.51 points or 0.5% to 10,680.77.