Weak jobs growth in 2013 will ensure the Reserve Bank of Australia keeps an open mind about the possibility of cutting the cash rate again.
Unemployment remained steady at 5.8 per cent in December, in line with economists’ forecasts.
But the total number of people with jobs fell 22,600.
The number of people with full-time jobs fell 31,600 to 8.068 million while part-time employment rose by 9,000 to 3.562 million, the Australian Bureau of Statistics said on Thursday.
The only thing keeping unemployment steady in December was the participation rate – the proportion of the population with a job, looking for one or who are ready to start work. That fell 0.2 per cent to a near eight-year low of 64.6 per cent.
Had it remained steady at 64.8 per cent, unemployment would have ended 2013 at 6.1 per cent, TD Securities head of Asia-Pacific research Annette Beacher said.
“Of the 55,000 jobs added since December 2012, all new jobs have been part-time, while full-time went backwards to the tune of 68,000,” Ms Beacher said.
But the falling Australian dollar, which hit a three-and-a-half year low of 87.96 US cents after the jobs figures were released, was a welcome development, she said.
“While there is plenty of sticker shock in this report, the labour market is treading water rather than collapsing,” Ms Beacher said.
“The decline in the participation rate appears to be a demographic problem, as the bulging baby boomer market shifts into retirement.”
National Australia Bank senior economist Spiros Papadopoulos said the participation rate would also have been driven lower by discouraged job seekers giving up on their employment search.
“There’s an element of an ageing population and people retiring, but there would also be an element of people giving up as well,” he said.
“The soft jobs growth is reflecting that below-trend growth we’re seeing in the economy at the moment – that ongoing softness in non-mining investment and general weakness in domestic demand conditions.”
The soft result would not be enough to prompt the RBA to cut the cash rate again, but it would ensure it maintained an easing bias, he said.
“For as long as the unemployment rate is trending higher, the debate will be whether we need to cut again, not whether we need to start raising,” he said.
Mr Papadopoulos said NAB expected unemployment to reach 6.5 per cent by the end of 2014.
But AMP Capital chief economist Shane Oliver said he expected to see jobs growth improve by mid-year.
“It should be recognised that employment is a lagging indicator, with the weakness that we are now seeing reflecting the soft economic conditions and bleak outlook seen around the middle of last year,” he said.
“With more forward looking economic indicators showing signs of improvement, for example housing approvals, retail sales and consumer and business confidence, jobs growth should start to improve by around mid-year.”
