June 12 (Bloomberg) -- Australia unexpectedly lost jobs in May, ending a record 18 months of gains and sending the nation's currency lower on speculation the central bank may not raise interest rates again.
Companies cut 19,700 workers after adding a revised 37,500 in April, the statistics bureau said in Sydney today. The median estimate of 22 economists surveyed by Bloomberg News was for a 13,500 gain. The jobless rate held at 4.3 percent.
The biggest decline in employment since September 2005 is the strongest signal yet that the Reserve Bank's two rate increases this year may be enough to cool the economy's 17-year expansion and damp inflation. Australian employers are mirroring job cuts in the U.S. and U.K. as oil prices surge to a record and global growth slows.
``The Reserve Bank is firmly on hold for the remainder of the year,'' said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. ``Businesses have put off or ceased their hiring for the time being. We'll have to wait and see whether this is a sign of more to come.''
The number of full-time positions declined 10,400 in May and part-time jobs dropped 9,300, today's report showed. About half of the nation's 21 million people are employed.
Australia's dollar slumped to 93.82 U.S. cents at 1:03 p.m. in Sydney, the lowest since May 16, from 94.63 cents before the report was released. The yield on the two-year bond shed 9 basis points, or 0.09 percentage points, to 7.01 percent. The benchmark S&P/ASX Index of stocks fell 2.2 percent to 5,348.70.
Airlines, Carmakers
Qantas Airways Ltd., Australia's largest carrier, said this month that it will slash services to Japan, shift other Asian routes to low-cost unit Jetstar and cut jobs in response to surging fuel costs. Crude oil climbed to a record $139.12 a barrel last week.
General Motors Corp.'s Australian unit, Holden, said last week that it will end production of four-cylinder engines at its Melbourne factory, where more than 500 people are employed. The company also cut 600 jobs at its Adelaide factory in March.
``Some loosening in the drum-tight labor market will be welcomed, and should help keep the Reserve Bank sidelined,'' said Su-Lin Ong, a senior economist at RBC Capital Markets in Sydney. Still, given there's a shortage of skilled workers, most ``employers are unlikely to turn around and shed labor after only several months of moderation in activity.''
Mining Boom
China's growing appetite for natural resources has seen companies including Rio Tinto Group expand mines, railways and ports, helping stoke 18 months of job gains through April that generated 456,000 positions in Australia.
The mining boom has driven expansion in Australia's $1 trillion economy, helping it weather the global credit crunch.
Reserve Bank Glenn Stevens and his board raised the benchmark interest rate to a 12-year high of 7.25 percent in March on concern a shortage of skilled labor would drive up wages and stoke inflation, already at the strongest since 1991.
Steven left the rate unchanged last week for a third month.
The chance of another quarter-point rate increase by September fell to 48 percent from 74 percent before the jobs report was released, according to 30-day interbank contracts traded on the Sydney Futures Exchange.
The slump in Australian jobs follows reports that show the U.S. unemployment rate gained the most in more than two decades in May, and the U.K. jobless rate rose to a seven-month high.
`Vengeance'
``Employment data is always the last to turn in an economic slowdown, but when it does turn it usually does so with a vengeance,'' said Clifford Bennett, chief economist at Sonray Capital Markets Ltd. in Sydney. ``The Australian economy is in a precarious state.''
Adding to signs the economy is moderating, consumer confidence slumped to the lowest level in almost 16 years in June, home-loan approvals dropped for a third month in April, and businesses were pessimistic for a fifth consecutive month in May, reports this week showed.
The participation rate, which measures the labor force as a percentage of the population aged over 15, fell to 65.2 percent in May from 65.5 percent in April, the figures showed.
The report ``is a sign that the Reserve Bank is on track, and their tightening is delivering the right amount of pain,'' said Matthew Johnson, an economist at ICAP Australia Ltd. in Sydney. ``A looser labor market cuts wage negotiating power, and thereby reduces the risk that high inflation will become embedded in the wage-price mechanism.''
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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