UPDATE 2-Australia jobless rate hits decade high, sinks A$

    * Employment drops 3,700 in Jan, well under forecasts of 
+15,000 
    * Jobless rate climbs to 6 pct, highest since 2003 
    * A fresh blow to confidence after news of automaking 
closures 
 
 (Adds graphics, new quote) 
    By Wayne Cole 
    SYDNEY, Feb 13 (Reuters) - Australia's jobless rate 
unexpectedly jumped to a decade high in January, intensifying 
concerns about the future of the manufacturing sector as global 
carmakers prepare to pull out. 
    The Australian dollar dropped nearly one U.S. cent on 
speculation interest rates might have to be eased again. 
    Thursday's data from the Australian Bureau of Statistics  
showed unemployment rose to 6.0 percent in January, the highest 
level since July 2003 and well above forecasts of 5.8 percent. 
    A net 3,700 jobs were lost in January, a huge disappointment 
as it followed a sharp 23,000 drop in December and meant no new 
jobs had been created at all in the past 12 months. 
    The poor report puts the Reserve Bank of Australia (RBA) in 
a tough spot as only last week it shut the door on more easing, 
citing signs past cuts were boosting activity along with an 
unwelcome pick-up in inflation. 
    The central bank has repeatedly said that it expected 
unemployment to rise gradually this year, so the numbers would 
not be a total shock. Yet were the jobless rate to move much 
above 6 percent, pressure would surely grow for a further cut in 
the 2.5 percent cash rate. 
    "Overall, a poor start to 2014 and while some may argue that 
employment is a lagging indicator, we would also suggest this 
print will be a negative for household income, sentiment and 
thus spending," said Justin Smirk, a senior economist at 
Westpac. "We are closely watching this space." 
    Futures markets are only pricing in a slender chance of an 
easing anytime soon   , though investors still decided to 
knock the local dollar down.   . 
    The report will add to the media gloom that followed 
Toyota's    decision this week to join Ford    and the 
Holden unit of General Motors    in ceasing manufacturing in 
Australia by 2017.    
    Government figures show that car makers have not made a 
profit since 2003, instead running up combined losses of A$4.4 
billion. Domestically produced cars comprise little more than a 
tenth of the 1.1 million vehicles sold annually in Australia. 
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    Employment vs inflation:  http://link.reuters.com/ned26s  
    Job advertisements:       http://link.reuters.com/mer46s  
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    NOT THAT BIG 
    The closures will be a blow to an already sluggish labour 
market given the ABS estimates around 45,000 people are employed 
in vehicle and parts manufacturing, with Toyota, Holden and Ford 
accounting for around 8,000 directly. 
    Alan Oster, chief economist at NAB, also noted the layoffs 
will come as a number of major resource projects are set to be 
completed with a resulting loss of construction jobs. 
    "The demise of the automotive construction industry can be 
expected to represent an additional headwind for the Australian 
labour market over the next twelve to eighteen months," he says. 
    Yet the scale of the blow should be kept in perspective. 
    Manufacturing as a whole accounts for only 7 percent of 
gross domestic product (GDP), and cars a mere 0.4 percent. The 
entire sector has just 8 percent of all jobs, behind 
construction, retail, and health care. 
    Employment in scientific, professional and technical 
services has expended so rapidly in recent years it is almost as 
large as manufacturing. 
    Indeed, the business of selling and maintaining vehicles has 
three times as many workers as car building, and they could 
actually fare better should import tariffs be removed entirely 
and imported cars become cheaper. 
    "Our analysis suggests that the impact on the national 
labour market and on growth will be small," said Diana Mousina, 
an economist at CBA. "The outcomes of industry restructuring 
over the past decade indicate that the bulk of the workforce 
find employment in other sectors." 
 
 (Editing by John Mair) 
 ((Wayne.Cole@thomsonreuters.com)(612 9373 1813)(Reuters 
Messaging: wayne.cole.thomsonreuters.com@reuters.net)) 
 
Keywords: AUSTRALIA ECONOMY/