The jobs market is getting weaker and this could mean more interest rate cuts in the new year, economists say.
The unemployment rate rose to 5.3 per cent in November from 5.2 per cent in October, the Australian Bureau of Statistics said on Thursday.
Total employment fell 6,300 to 11.457 million in the month.
The data was significantly weaker than market forecasts for a rise in employment of 10,000 jobs in November.
AMP Capital Investors chief economist Dr Shane Oliver said the job figures showed the labour market was softening as expectations for the economy turned sour.
“The economy outside mining has been quite weak so companies have had to start laying people off to get their costs under control,” he said. “Until recently it was the one strong patch of the economy outside mining, but quite clearly the jobs market is giving way as well.”
Dr Oliver said the figures meant it was likely the Reserve Bank of Australia (RBA) would cut interest rates by up to 50 basis points early next year.
“The reality is we’ll probably see more weakness, going forward, which I think will justify more rate cuts next year,” he said.
The RBA cut the cash rate at its November and December board meetings, each time by a quarter of a percentage point, taking the rate to 4.25 per cent from 4.75 per cent.
Macquarie Group senior economist Brian Redican said he didn’t expect a bounce back in employment because of the expectation that the eurozone government debt crisis could cause a recession in Europe.
“We expect firms will be reluctant to increase their hiring until they have evidence that demand is picking up, and I don’t think that will turn around in the next few months,” he said. “It highlights the reasons for the Reserve Bank to ease interest rates at the moment.
“Despite strong growth in some sectors of the Australian economy, it’s not translating through into stronger employment.
“That suggests for 2012 there will be weaker consumer spending, greater downside risk for businesses and this is, of course, even before the full impact of the European debt crisis.”
Mr Redican said he believed the board of the RBA would cut the cash rate again at its next scheduled meeting in February, taking it to four per cent.
“These kind of (jobs) numbers, the possibility of a very low inflation rate in the fourth quarter would certainly all be consistent with the Reserve Bank trimming rates once again.”
