SYDNEY, July 11: Australian employers surprised by hiring more workers in June but the much more rapid growth in the population drove the jobless rate to its highest in almost four years, keeping intact the chance of an interest rate cut next month.
While markets initially saw the pickup in hiring as lessening the chance of a cut in interest rates in August, economists emphasised it was the rise in unemployment that mattered more for monetary policy.
‘Everybody’s been expecting unemployment to go up, and now it has. Everybody expects it to rise further, and it probably will,’ said Michael Turner, a strategist at RBC Capital Markets.
‘It’s not a green light for a rate cut in August, but it clears one barrier out of the way. It’s not an open or shut case, but the run of data is leaning that way.’
Indeed, after an initial wobble interbank futures soon steadied to show a 50-50 probability of a rate cut at the Reserve Bank of Australia’s (RBA) next meeting on August 6.
Swap rates imply an even higher chance at 60 percent. The central last cut rates to a record low of 2.75 percent in May, and has said it remains open to another move if needed.
‘We are suggesting the RBA will cut the interest rate next month,’ said Diana Mousina, an economist at Commonwealth Bank. ‘The labour market is weakening, and we expect jobs growth will continue to be quite subdued over the remainder of the year.’
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Thursday’s data from the Australian Bureau of Statistics showed the country added 10,300 net jobs in June, confounding forecasts for a small decline.
Yet the unemployment rate still ticked up a tenth to 5.7 percent, its highest since September 20009, as more people went looking for work.
Australia has been enjoying strong population growth — 1.8 percent in the year to December — so employment has to rise faster to absorb all the new entrants into the labour force.
The latest breakdown of employment by industry is for the year to May and they show a net job gain of almost 127,000 led by retail, health, transport and government.
The biggest losses were in agriculture, rental and real estate, communications and manufacturing. For all the media talk of labour shedding in mining employment in that sector was only down slightly in the six months to May.
Still, many suspect there is more slack in the labour market than the headline jobless number would suggest. When you add in those employed but would like to work more hours, the underutilisation rate is 12.9 percent.
‘Corporates have, so far, mainly cut bonuses, hours worked and wage rates – to trim wage bills – rather than a broad-based slashing of jobs,’ Scott Haslem at UBS.
‘Ongoing weakness in leading indicators of the labour market are warning this ‘labour hoarding’ can only continue for a short time, and demand needs to pick up soon to avoid unemployment lifting above 6 percent.’
(agencies)
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