Surprise jobless rise eases RBA rate threat


Update Australia's unemployment rate unexpectedly rose to 5.3 per cent in July as more people sought work. Investors dumped the dollar as the surprise weakness all but ruled out another rise in official interest rates this year.

The jobless rate jumped from the 5.1 per cent recorded for both May and June, according to the Australian Bureau of Statistics. Analysts had predicted the steady rate to continue.

"The cash rate probably will be left unchanged at 4.5 per cent into 2011 because trend inflation is falling neatly back into the (Reserve Bank's) 2-3 per cent band," said Macquarie interest rate strategist Rory Robertson.

For the month of July, companies added 23,500 jobs - more than the 20,000 expected - taking the total employed to 11.23 million. Firms added 27,700 part-time positions but shed 4200 full-time ones, the first decline in almost a year.

Australia's labour market had been one of the brightest spots in an economic recovery that remains patchy. Today's jobs figures are the last major economic indicators before Australians go to the polls on August 21.

Other areas of the economy have been less robust. Business confidence slumped to a 14-month low in July, according to a survey out earlier this week. Retail sales remain soft, although consumer confidence picked up last month. The key housing sector, meanwhile, is cooling with auction clearance rates falling and new home loans dropping to a nine-year low in June.

Today's jobs news added to the dollar's recent slide, sending it down about half a US cent to 89.2 US cents as investors cut their bets about early interest rate increases by the central bank. Australia's interest rates are relatively high by global standards, and are one of the reasons foreign investors buy the currency.

Tricky data

Interpreting this month's labour figures, though, is trickier than usual.

For one thing, revisions for previous months suggest the labour market was weaker than first recorded.

For instance, the ABS had originally reported that companies added 18,400 full-time jobs in June. That gain has been sliced now to 12,200 such positions, while that month's part-time jobs gain was also trimmed to 25,200 positions from a first report of 27,500.

And July's overall jump in the unemployment rate included a significant increase in the number of people looking for work - often a positive signal as it reflects increased confidence among those outside the workforce.

As a result, the so-called participation rate - the number of people actually working or looking for work - increased to 65.5 per cent of the total working-age population in July, from an upwardly revised 65.3 per cent in June.

''Strong recent hiring and a robust economy has drawn more people back into the workforce and pushed up the participation rate, which bodes well for stronger employment and GDP growth down the track,'' said economist Matthew Circosta of Moody's Analytics.

''With interest rates on hold and confidence rising, solid employment gains should translate into healthier private consumption later in the year,'' he said.

RBC Capital Markets economist Michael Turner says the softness in the labour market combined with renewed worries about the strength of the global economy means further official rate rises are off this year's agenda.

"This is consistent with the RBA staying on the sidelines, which when coupled with recent global developments increases already significant risks we do not hear from the RBA again until 2011," said Mr Turner.

Broad-based rise in jobless rate

The jobless rate rose in the east coast states and Western Australia.

In New South Wales, the jobless rate jumped to 5.6 per cent in July, seasonally adjusted, from 5.3 per cent in June. In Victoria it rose to 5.5 per cent from 5.4 per cent over the same period.

In Queensland, the jobless rate increased to 5.6 per cent from 5.3 per cent, while in Western Australia, it rose to 4.4 per cent from 4 per cent.

However, the jobless rate improved elsewhere.

In South Australia, the jobless rate eased to 5.1 per cent in July from 5.4 per cent. It also fell in Tasmania, to 6.5 per cent from 6.7 per cent.

4Cast Ltd economist Ray Attrill said the rise in the jobless rate will help ease the pressure for wage increases, removing some of the urgency for the Reserve Bank to keep a lid on prices by raising interest rates.

"For now (the jobs numbers) will alleviate - a little - concerns about ever tightening labour market conditions putting upward pressure on wages," he said.

The ABS revised its population estimates in the latest survey on the labour market, affecting the total employment numbers from July 2010 back to 2006. The statistics agency has tried to account for changes in the pace of growth of the population and the recent slowdown in migration.

Earlier this week, the ANZ Bank released its monthly job advertisements survey showing its index rose in July but at a slower pace than in June, suggesting the pace of job creation was tapering slightly. The index - a leading indicator of employment - increased 1.3 per cent in July, following 2.8 per cent growth in June.

If enough people vote Greens, there`ll be some massive jobless figures.

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Too true, they are labled otherwise.

Or for that matter liberal.

It came as no surprise to me, and watch the figures rise even more after the election  when ABS funding kicks back in again, and the real figures are revealed that a Labor government are doing their best to conceal.

There are always jobs for educated, skilled workers.

If people wish to be in the position of being unskilled and then find themselves struggling to get a job other than clean the street - then they should probably look back on the choices they made in life.

Nobody gets a free ride, you reap what you sow.

mellie wrote on Aug 12^th, 2010 at 3:10pm:

ABS funding was boosted again. With the large samples they do the reduction in survey sample size would have amounted for 0.0035% more variance in the results. the funding has since been restored anyway.

I suggest you have a good search and read here: http://blogs.crikey.com.au/pollytics/

before spouting off basic errors that show you do not know what you are talking about. There was an increase of 23,000 jobs—other developed countries can only look on in jealous amazement at how good our economy is travelling!

Andrei.Hicks wrote on Aug 12^th, 2010 at 7:47pm:


Correction: -

Nobodies don't get a free ride; they reap the crap that sons of elitists sow!