By Wayne Cole
SYDNEY, Dec 9 (Reuters) - Australian employment blew away forecasts by surging 54,600 in November as firms took on many more full-time workers, a resounding counterpoint to recent soft data and an omen that interest rates may not stay on hold for too long.
The Australian dollar leaped half a cent as the jump in jobs far surpassed expectations of a 19,000 rise while full-time hires climbed 55,100. The jobless rate dropped to 5.2 percent, from 5.4 percent, even though the participation rate hit a record high of 66.1 percent as more people went looking for work.
Such unalloyed strength supported the Reserve Bank of Australia's (RBA) confidence in the economic outlook and its rationale for raising interest rates to 4.75 percent last month as a pre-emptive strike against inflation.
"Another absolutely scorching result," said James McIntyre, an economist at Commonwealth Bank. "Annual employment growth of 3.7 percent shows the economy is in very rude health."
"I guess it also poses the question that if we keep seeing numbers like this, the RBA may find come February that instead of being ahead of the curve it has fallen behind."
Top RBA officials had intimated they were comfortable with where rates were and there was little prospect of an imminent tightening. The market had gone much further and pushed out the timing of any further hike to the second half of 2011.
Interbank futures <0#YIB:> are still not fully priced for a move to 5.0 percent until August.
"Absolutely extraordinary numbers," enthused Brian Redican, a senior economist at Macquarie. "That's a lot more people working and earning, with more incomes and greater demand."
"This should be a wake up call for the markets which have grown far too complacent about the risks of a rate hike in the near term," he warned. "Every RBA meeting will be a live one when you have jobs growth like this."
WHAT SOFT PATCH?
The jobs figures were a welcome contrast to some softer data recently. In particular it suggested the surprisingly meagre rise of 0.2 percent in third-quarter gross domestic product (GDP) understated the true strength of the economy.
That was an argument made by RBA Assistant Governor Philip Lowe on Wednesday, who noted that GDP tended to bounce around from quarter to quarter but looking past the statistical noise the economy was heading toward faster growth as expected.
Employment has sped past all expectations this year with a rise of 402,500, a breakneck pace for an economy with a potential labour force of just 12 million. An equivalent increase in U.S. payrolls this year would have been 5 million.
Much of the growth has been in full-time jobs, which tend to offer better pay and conditions than part-time work, helping boost incomes and confidence across the economy.
Jobs growth has been fastest in the booming mining and energy sector, running at 20 percent a year, though the biggest hiring has been in professional, scientific and technical services, education and health.
A record pace of resource investment is also driving jobs in construction. The A$43 billion Gorgon liquefied gas project alone will employ 10,000 at the peak of construction.
Most forward indicators of labour demand like vacancies and business surveys point to further jobs growth ahead, albeit at a more restrained tempo.
The sting in the tail is that unemployment was approaching lows that have bred wage and price pressures in the past.
The RBA will be especially keen to avoid a repeat of 2007 to 2008 when the jobless rate fell steadily to a trough of 4 percent while annual underlying inflation raced to peak of 4.7 percent, far above its 2 to 3 percent target.
"People have been excessively bearish and this serves as a reminder that the Australian economy is very strong," said Adam Carr, chief economist at broker ICAP.
"I don't think the RBA will be sitting pretty til mid-year. I see a rate hike in Q1 because the global economy and the Australian economy are accelerating." (Editing by Balazs Koranyi)