SYDNEY, Sept 6: Australian employment dipped unexpectedly in August even as the jobless rate also surprised by dropping to a three-month low of 5.1 percent, a mixed result that did nothing to alter expectations of more rate cuts.
Thursday’s data from the government showed employment fell 8,800 in August, though full-time jobs edged up by 600. Forecasts had favoured a modest rise of 5,000 in jobs and an unemployment rate of 5.3 percent.
‘Overall a fairly soft set of numbers. An exception to that was the fall in the unemployment rate, which was unexpected, and that put a nice veneer on the number,’ said Brian Redican, a senior economist at Macquarie.
However, the jobless rate only fell because more people gave up looking for work, pulling the participation rate down to 65.0 percent, the lowest since early 2007.
‘There is little labour demand … People aren’t finding jobs, they’re giving up looking for them now,’ added Redican. ‘This won’t push the Reserve Bank to cut rates in October, but nor will it stand in the way of a rate cut for other reasons.’
The Reserve Bank of Australia (RBA) left interest rates steady at 3.5 percent on Tuesday but highlighted recent sharp price falls in resource exports and admitted to uncertainty about the outlook for China, Australia’s biggest customer.
The sober tone has seen markets narrow the odds for a rate cut as soon as October, following easings in May and June. Interbank futures <0#YIB:> put a 66 percent probability on a move in October and are fully priced for 3.0 percent by Christmas.
Overnight indexed swaps, which show where the market thinks the cash rate will be over time, put rates at 2.82 percent in 12 months. Yields on Australian 10-year bonds are down at 3.00 percent, so it is cheaper for the government to borrow for a decade than for banks to borrow overnight.
The Australian dollar edged higher on the data, which was not as weak as some sellers had wagered on.
LESS PARTICIPATION
Annual employment growth was a pedestrian 0.5 pct in August, while net new hiring amounted to a moderate 86,000 for the first half of the year, which was just about enough to match the increase in the total labour force.
Traditional big employers such as retail and construction have been shedding jobs, while manufacturing has suffered under a high currency and intense competition.
The booming mining sector has been a big hirer, both directly and through support services, though recent sharp falls in iron ore prices could cool hiring growth in coming months.
Healthcare is also expanding rapidly as the population ages and is now the biggest single employer.
Leading indicators of hiring such as vacancies point to only modest growth ahead, which is why most analysts have been expecting the unemployment rate to rise to 5.5 percent or higher for some time.
Instead, the jobless rate has stayed remarkably steady between 4.9 percent and 5.3 percent for over two years. At the same time the participation rate has fallen from a high of 66.0 percent in November 2010, to 65.0 now.
‘We’ve seen a trend down in participation rates, and that’s why the unemployment rate hasn’t gone up by more,’ said Shane Oliver, chief economist at AMP Capital Investors. ‘It suggests people are a bit sceptical about the jobs market and are not even bothering to look.’
‘Overall, these figures are consistent with our view that the Reserve Bank has more work to do,’ he added. ‘We’re looking to 3.0 percent by the end of the year.’ (agencies)
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