Unemployment rate holds steady at 6.2 per cent
AUSTRALIA’S jobless rate remains at the highest level in almost 12 years, a sign that many businesses are reluctant to hire in an uncertain economic climate and that interest rates may need to stay at record lows for a while yet.
Unemployment stayed at a higher-than-expected 6.2 per cent in October, the same as the recently revised number for September. Economists had expected the unemployment rate to ease to 6.1 per cent.
The number of people employed rose by 24,100 in October, compared with an expected 10,000 rise, the Australian Bureau of Statistics said.
The number of people in full-time work climbed by 33,400, while those in part-time work fell by 9,400.
The participation rate, or the proportion of working-age people in employment or actively seeking it, rose to 64.6 per cent in October from 64.5 per cent the previous month. Economists had expected the participation rate to remain at 64.5 per cent.
The higher participation rate helps explain why the jobless rate remained steady in October even as the number of people in employment rose sharply.
National Australia Bank senior economist Spiros Papadopoulos expects the unemployment rate to peak at 6.5 per cent early next year.
“The bottom line is we’ve got an economy where there is a bit of jobs growth happening but not enough to stop the increase in the unemployment rate,” he said.
“We think it will get stuck around 6.5 per cent in the first half of next year, and towards the end of next year as jobs growth picks up that’s when it will fall back.”
That sluggish employment growth should keep the Reserve Bank’s interest rate unchanged for most of 2015, until the unemployment rate heads down towards 6 per cent or below, Mr Papadopoulos said.
However, ANZ senior economist Riki Polygenis remains cautious about over interpreting the figures, given recent revisions and methodological changes.
“In particular, we note that the official labour market figures are painting a much weaker picture of the labour market compared to the broader suite of indicators that generally point to improving conditions,” he said.
“Our view remains that the labour market should not deteriorate any further, with most unofficial statistics pointing to some gradual improvement in labour market conditions.”
The Reserve Bank left interest rates at a record low 2.5 per cent at a policy meeting on Tuesday, signalling that it would keep them low for some time longer. Most economists expect the next move in rates to be up, but not until well into 2015.
Rates have been at a record low for well over a year amid lacklustre economic growth, as a decade-long mining-investment boom fades. Firms have been slow to ramp up hiring and investment in a global and domestic environment that many still consider to be unstable.
The monthly employment report has come under increasing scrutiny since last month, when the ABS said it would revise its data after finding that routine seasonal adjustments looked out of step with actual trends.
The admission provoked a flood of criticism, including from the central bank and economists faced with determining the health of the economy. Earlier this week, the ABS made unexpected backdated revisions that lifted September’s jobless figure to 6.2 per cent from 6.1 per cent.
The central bank is expected to announce revisions to its own economic forecasts tomorrow in a quarterly policy statement.
While recent falls in the Australian dollar are likely to provide some stimulus, sharp falls in the prices of the commodities Australia exports are weighing on the economy.
The country’s biggest export, iron ore, has tumbled by more than 40 per cent this year.
Employment Minister Eric Abetz said the jobless figures reflected an “underlying softness” in the labour market and demonstrated the need for senators to pass the government’s budget measures.
“The government has a suite of legislation before the Senate that will fuel job creation,” Senator Abetz said.
“This result underscores the importance for the Senate to pass legislation that will create more job opportunities, in particular for young Australians who are eager to gain employment.”
Senator Abetz noted the government’s achievements in repealing the carbon and mining taxes, sealing bilateral trade pacts with Korea and Japan, removing red tape for small businesses and approving major projects.
Federal opposition employment spokesman Brendan O’Connor blamed state and federal Coalition governments for the “disturbingly high” jobless figures.
“In the past month, youth unemployment rose from 13.5 per cent to 14 per cent, its highest since Mr Abbott was employment minister in the Howard government,” Mr O’Connor said.
“The scourge of youth unemployment is acting as a handbrake on the Australian economy and Mr Abbott has done nothing to fix it.
“Instead of outlining a jobs plan to help young people find work, Mr Abbott’s only idea is to force job seekers to apply for 40 jobs every month or be cut off from income support.”
With Jared Owens, AAP
Article courtesy of The Australian – Business Review, Thursday 6th November 2014