A 10-month high in the jobless rate is not enough to prompt a cut in interest rates, economists say.
But that could change if unemployment keeps rising.
Official figures show the unemployment rate rose for a second consecutive month, to 5.3 per cent in August, from an unrevised 5.1 per cent in July.
JP Morgan economist Ben Jarman said he had expected the unemployment rate to rise after a volatile August in which businesses pulled back on hiring.
“We did think that it was a pretty rough month for businesses in general,” Mr Jarman said.
“It is more likely a case of firms staying on hold on the hiring front, rather than any significant number of layoffs.”
Global markets went into meltdown in early August after Standard & Poor’s ratings agency downgraded US government debt from its coveted, top-notch AAA status.
Mr Jarman said other figures in Australia such as job advertisements and business confidence also fell in August.
Total employment fell for the second consecutive month, down 9,700 to 11.433 million in August, the Australian Bureau of Statistics (ABS) reported on Thursday.
Market expectations were for total employment to have risen by 12,000 in August, according to the median of 13 economists surveyed by AAP.
The Australian dollar shed more than half a US cent and bonds rose on the weak jobs data.
CityIndex chief market analyst Peter Esho said the labour figures were poor on face value but not bad enough to prompt the Reserve Bank of Australia (RBA) to consider interest rate cuts.
He said the RBA was unlikely to raise the cash rate because of its mandate to keep inflation in a two to three per cent band over the medium term.
“So we still think this data set alone is not adequate enough to see the RBA changing course anytime soon, at least not over the next month,” Mr Esho said.
Macquarie Group senior economist Brian Redican said the continuing weak jobs figures suggested the labour market had taken a turn for the worse and did not match the central bank’s view of the local economy.
“Once the unemployment rate starts going up to 5.5 per cent, which is now only a breath away, that does suggest that growth is too slow and it’s going to put pressure to cut rates.”
UBS interest rate strategist Matthew Johnson said the money market was pricing in an expectation for the cash rate being cut by 67 basis points, or almost three quarter point cuts, before the end of the year.
He said the weak jobs data justified some, but not all, of the cuts priced in by the market.
“I think the RBA would like the unemployment rate around 5.3 per cent but I don’t think they would like unemployment around 5.5 per cent,” Mr Johnson said.
“If the labour market keeps on doing this then history suggests the RBA will respond.”
