A rise in Australia’s unemployment rate proves the country’s jobs market remains weak and adds to the case for further interest rate cuts this year, economists say.
Data released by the Australian Bureau of Statistics (ABS) on Thursday showed Australia’s unemployment rate rose 0.1 per cent in February, to 5.2 per cent.
According to the data, total employment fell 15,400 to 11.444 million in the month.
The market forecast was for total employment to have risen by 5,000 in February with the unemployment rate at 5.2 per cent, according to the median of 17 market economists surveyed by AAP.
National Australia Bank senior economist Spiros Papadopoulos said the data would add to the case for the Reserve Bank of Australia (RBA) to cut the official interest rate in the coming months.
“Obviously, it’s a much weaker outcome than the market was expecting and I suppose it’s a further sign of the softness in the economy at the moment,” he said.
“In itself, it’s probably not enough to get the RBA over the line but it is another contributing factor.”
Mr Papadopoulos said that despite the month-by-month volatility of labour force data, Australia’s unemployment rate hadn’t changed since mid-2011, indicating weak employment growth.
“If you look at the actual level of unemployment, we haven’t gone anywhere since June last year.”
ICAP senior economist Adam Carr said the low level of average employment growth over recent months was being maintained.
The 15,400 fall total employment in February would partially balance out the rise of more than 46,000 in January.
“It was a fairly neutral result,” Mr Carr said.
“There’s no change to the well-established patterns of last year.
“Firms are cautious about hiring but there’s no sign of job shedding, as yet.”
Mr Carr said employment growth over the next few months would depend on optimism about the global economy.
“Domestic demand is well above trend, which suggests we should see significant jobs growth, going forward. But it really comes down to some of that global uncertainty abating.”
Mr Carr said the jobs figures would not be enough to spark an RBA interest rate cut.
“This is completely neutral for rates,” he said.
“The RBA said they wanted to see a material decline in demand to cut rates again and we haven’t seen that.”
HSBC chief economist Paul Bloxham said the weak jobs growth pattern could open the door for another RBA rate cute.
“I think the labour market looks fairly lacklustre and if you combine this with the weak GDP (gross domestic product) numbers from yesterday, it provides more evidence that the economy is tracking a bit below trend growth at the moment,” Mr Bloxham said.
“We think this will leave the door open for the RBA to cut rates further.”
Mr Bloxham said he expected the next RBA rate cut would be in the June quarter. He said it would most likely be in May after the release of March quarter inflation figures on April 24.
He said the non-mining sectors continued to weigh on local economic growth.
“We’ve got some parts of the economy slowing down, other parts speeding up and the net result is that the slow lane is more than offsetting the fast lane,” he said.
“We think there will be a rise in the unemployment rate in the new year (2012) but this will be a key motivation for the RBA to cut rates and we’ll start to see the unemployment rate come down again.”
