Unemployment has fallen to its lowest level in six months but the outlook for the labour market remains bleak as many companies cut their workforce.
The unemployment rate fell to 5.1 per cent in January, from 5.2 per cent the month before, to its lowest since July 2011, official figures show.
Total employment in January rose by 46,300 according to Australian Bureau of Statistics (ABS) figures released on Thursday.
ICAP senior economist Adam Carr said average employment growth in recent months was still low.
The ABS trend estimates for employment growth, a smoothed out version of the seasonally adjusted figures, showed jobs growth at 1,700 a month.
“So I’m not going to get too excited about today’s spike,” Mr Carr said.
“This still indicates a significant amount of caution among employers given the (low) strength in private demand,” he said .
“That hours worked fell could be an early indicator that some of this caution is unwinding, given European fears appears to be stabilising, notwithstanding recent news-flow over Greece,” Mr Carr said.
Macquarie senior economist Brian Redican said he doubted that the fall in unemployment had been helped by the Reserve Bank of Australia’s (RBA) November and December rate cuts.
“I really think it would be far too early to see the impact of those rate cuts on activity, particularly before it’s affected retail sales, building approvals or manufacturing activity,” he said.
“To some extent, it’s a correction from the previous two months.
Mr Redican said the unemployment rate is likely to rise in the first half of 2012.
Two of the major banks, Qantas and breads and spreads maker Goodman Fielder are just the latest Australian companies to announce redundancies.
“In the last 24 hours, you’ve seen a number of companies announcing employment cutbacks,” he said.
“With the Aussie dollar getting stronger, that pressure is not going to be relieved.”
AMP Capital chief economist Shane Oliver agreed the outlook for employment growth was poor.
“Despite the good news in the official figures for January, we continue to see unemployment rising over the next six months in response to tough conditions outside the mining sector in Australia,” Dr Oliver said.
“More importantly, the pace of job-layoff announcements has picked up recently and is yet to impact,” he said.
Dr Oliver said the strong Australian dollar and the raising of interest rates by thee banks independently of the Reserve Bank would also dampen jobs growth.
“We still think there is a strong case (for the RBA) to cut official interest rates further but the strong January jobs data has increased the risk that the next cut may be several months away.
