Australia Jobless Rate Soars

SYDNEY—Australia's unemployment rate rose to the highest level in more than a decade, highlighting the impact a mining slowdown is having on the resource-rich economy.

The jobless rate rose to 6% in January—a level last recorded in July 2003—eclipsing a peak of 5.9% reached in 2009 during the depths of the global financial crisis.

The weak employment figures raised fresh doubts about the strength of the economy. They follow a string of more upbeat data, including sharply rising house prices and a recovery in business sentiment and retail sales, that had buoyed hopes for an economic turnaround in 2014 following a yearlong slowdown. The central bank has been trying to spur the nonmining segments of the economy by cutting interest rates eight times over the last two years to a record-low 2.5%.
Australia's jobless rate has been creeping up as thousands of workers in the once-booming resources sector have lost jobs as companies adjusted to lower commodity prices. The latest layoffs came this week at mining services company Forge Group Ltd. FGE.AU +11.59%  which cut 1,300 workers after calling in insolvency specialists, having run into trouble on two Australian power projects.

For Joe Powell, managing director of online job search agency Seek, that is hurting business in some of Australia's biggest states that rely on resources to power their economies.

"In Western Australia, job ads are off about 48%, and in Queensland they're off about 44%, so the mining sector has definitely taken a hit," Mr. Powell said.

Coal-rich Queensland alone lost nearly 12,000 jobs in January, according to the Australian Bureau of Statistics, while the jobless rate in Western Australia—home to some of the country's biggest iron ore projects—rose to 5.1% in January from 4.6% a month earlier. A year ago the unemployment rate in Western Australia was as low as 4%.

The job losses have spread to sectors such as auto manufacturing and the airline industry, hurt by fierce competition and a strong Australian dollar.

Toyota Motor Corp. 7203.TO -1.99%  said Monday it would stop producing cars in the country in 2017, resulting in the loss of at least 2,500 jobs. It joins Ford Motor Co. F +0.53%  and General Motors Co. GM -1.01%  who are planning similar departures in the next few years. Flag carrier Qantas Airways Ltd. QAN.AU +1.69%  said recently it would cut 1,000 jobs to help stem losses.

Economists had expected unemployment to rise in January. Surprisingly, though, the number of people employed fell 3,700 in the month, compared with an expected 15,000 increase. Thursday's jobs data showed the participation rate remained close to an eight-year low of 64.5% as disgruntled workers gave up looking for work.

"The labor market remains the weak spot of the economy," Citi economists said in a research note Thursday. "There has been no employment growth over the past 12 months."

Still, some economists said the data were out of step with other more positive indicators. Business confidence rose in January for the first time in four months, signaling firms may be more willing to take on new workers in coming months.

States that are less dependent on the resources industry, such as New South Wales, remained steady or saw improvements in their jobless rate during the month.

"Sydney is performing pretty well, Melbourne is performing reasonably strongly," said Chris McDonald, general manager of the Australian arm of global job search engine Indeed.com. Both of those cities are on Australia's east coast, away from mining centers such as Perth where employment is "off the boil," according to Mr. McDonald. Pockets of strong jobs growth include IT and banking, with the number of vacancies for software developers doubling between December and February, he said.

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