Unemployment has hit a four year high and could get up to six per cent as the mining investment boom plateaus.
The unemployment rate hit 5.8 per cent in August, in line with economists’ forecasts – up from July’s rate of 5.7 per cent, the Australian Bureau of Statistics said.
The total number of people with jobs fell 10,800 in the month, seasonally adjusted, compared to market expectations of a rise of 10,000.
The figures show businesses have been trimming costs to support profits and cash flow for some months, NAB senior economist David de Garis said.
Pre-election jitters causing a deferral of hiring would have been a minor factor, he said.
“Businesses have had to drive some profits out of costs and of course one of their big costs is labour,” he said.
“The August labour force report is consistent with other recent indicators such as ANZ Job Ads, the NAB employment index that have worsened this past month.”
Separate business and consumer confidence surveys released earlier this week produced strong results, and Mr de Garis said that confidence would have to be sustained in order to give employment a boost.
“We are not at that point now and for that reason we expect the Reserve Bank of Australia to retain its easing bias as the economy transitions from its resource-led source of growth,” he said.
“In the meantime, our expectation is that the unemployment rate will increase further, to above six per cent by the first quarter of next year.”
Commonwealth Bank senior economist John Peters said the rise in the unemployment rate in 2013 has been slower than expected.
“A weakening labour market in the mining states (WA and Qld) is being offset by better outcomes in the some of the other jurisdictions, particularly the larger states on the eastern seaboard,” he said.
“NSW and Victoria are undoubtedly benefiting from the lower interest rates environment, the lower Australian dollar and, for confidence issues, signs of a pick-up in US economic activity, which will help parts of the financial sector.”
A rise in the number of hours worked might be an encouraging sign that businesses may need to start hiring soon, Mr Peters said.
The number of hours worked in August rose for the third consecutive month, and was two per cent higher than in the previous August.
“Continuing rises suggest that employers may be getting closer to employing extra staff as hours worked by existing workers continue to lift,” he said.
Mr Peters added the soft jobs data won’t alter the Commonwealth Bank’s view that the RBA’s cash rate of 2.5 per cent won’t go any lower.
The ABS also reported that the participation rate fell to 65.0 per cent in August, from to 65.1 in July.
