After Mark McGrath lost his job in Sydney in November, he tried to follow the thousands of Australians who headed to the nation’s mines, which have mopped up surplus workers and fuelled growth for a decade. Not anymore.

Fired by Royal Dutch Shell after 26 years when the oil company shut its Sydney refinery, McGrath put his home in the suburb of Liverpool up for sale to seek a job in the coal mines of the Hunter Valley, 210 km to the north. He could not find work because the boom in demand for coal, iron-ore, gold and oil that supported the economy is waning, adding to unemployment swelled by an ailing manufacturing base.

“Companies won’t hire,” McGrath says by phone from the central coast, separated from his family, who are packing up the Liverpool home. “They’ve a lot of contractors working in the pits up here, who are being let go first,” he says.

A drop in hiring of support staff by resources companies is one of the first indicators of a broader downturn because each mining position creates four to five contract jobs in related services, says Martin Whetton, an interest rate strategist at Nomura Holdings, in Sydney.

“Mining service companies are the canary in the coal mine,” says Whetton. “We’re likely to see higher unemployment over the course of the year.”

The Reserve Bank of Australia (RBA) predicts the labour market will “remain somewhat subdued” and the Australian government, in its May Budget, projected unemployment would rise to 5.75% by June 30, 2014, from the current 5.5%. That compares with a US jobless rate of 7.5% and an average of 8.1% for the Organisation for Economic Cooperation and Development.

The deteriorating job outlook and a slowdown in China, the biggest buyer of the nation’s minerals, have sparked a reappraisal of Australia’s economic prospects, driving the currency 6.8% lower in the past month.

It is too late for some manufacturers who have struggled to compete during the Australian currency’s longest streak above parity with the US dollar in 30 years. Ford Motor announced on May 23 it would end production in the country after nine decades, with the loss of 1 200 jobs.

Traders are betting the RBA, which held its benchmark interest rate unchanged at a record-low 2.75% after meeting in Sydney last week, will in the coming months extend cuts to stoke employment, according to swaps data compiled by Bloomberg.

In the past month, mining support companies Boart Longyear, Transfield Services and UGL said the deferral of major projects by large miners in response to falling commodity prices would weaken earnings and spark job cuts. The Bureau of Resources and Energy Economics projected in a May 22 report that investment had peaked after mine projects with a combined price tag of A$150-billion ($146-billion) were delayed or scrapped in the past year.

Xstrata, the world’s biggest thermal coal exporter, in March shut its office in Brisbane, the capital of Queensland state, after announcing in September that it would cut about 600 jobs. Whitehaven Coal said on March 22 that it would revise a mine plan and lose about 40 workers.

“There’s very low demand for labour at the moment in the coal mining sector,” says Delphine Cassidy, GM of corporate affairs at Melbourne-based Skilled Group, a labour contractor that has recruited staff for 50 years and has more than half its business in mining, oil and gas. “Instead of having 30 people on a shift, they’ll probably only put an order for ten.”

Almost one in ten Australian jobs is tied to resource extraction, twice the level of the mid-2000s, according to an RBA paper released in February.

Chinese manufacturing indexes showed small businesses struggling, sapping momentum in the biggest market for Australian exports. The official Purchasing Managers Index for smaller companies fell to 47.3 in May from 47.6 the previous month.

The Australian dollar, which held above $1 from mid-June last year to May 10, has declined along with China’s prospects. The currency traded at 97.24 US cents last week.

That did not help Stewart Harris, who spent his entire 23-year working life at Ford and had expected to stay at the automaker till he retired.

“The skills base we have is so specific to this industry,” says Harris, 42, who worked on the final assembly line at Ford, which has said it will close its Melbourne and Geelong plants in October 2016. “I don’t know what the future holds for me.”

Ford has made cars in Australia since founder Henry Ford began building Model Ts in the country in 1925. It costs the company four times as much to make a car in Australia as it does in its Asian divisions, says Bob Graziano, president of Ford Australia.

In the past, workers like Harris could switch to the mining and energy industries in the nation’s north and west. Now, that door is closing. In the three quarters to February, the resources industry lost 10 600 jobs, according to government data, the worst nine-month stretch since August 2009. Manufacturing has lost 28 900 jobs in the past year.

One resources industry that is helping mitigate the slowdown is natural gas. The growing popularity of the fuel in Asia is prompting companies, including Chevron and ConocoPhillips, to build seven liquefied natural gas projects for almost $200-billion. This has helped keep Australia’s unemployment rate at between 5% and 5.5% 23 of the past 24 months, according to government data.

Still, construction of Santos’s $18.5-billion Gladstone liquefied natural gas project in Queensland will peak this year, says CEO David Knox. More than 7 000 people are working on the development, he addeds. BG Group’s Australian unit said in a May 24 statement it had been hiring more than 15 people a day for six months and 11 600 people were working with the company and its major contractors.

“There had been some pullback in coal investment plans in the previous year and a significant amount of investment in iron-ore projects had been completed,” the RBA said in minutes of its May policy meeting. “In contrast, a larger share of ongoing mining investment is related to liquefied natural gas projects.”

McGrath is now working for a labour union, helping workers negotiate with management, after his four-month quest to land a mining job failed.

“I still know blokes from Shell that haven’t picked up work and are absolutely despe- rate,” McGrath says. “These guys are looking in the oil and gas industry, but some of them are just so frustrated now and they’ve been to that many interviews. I’m talking about blokes that have got 15 to 20 years’ experience.”