Fall in jobless numbers surprises market
The unemployment rate fell to 5.6 per cent last month from 5.8 per cent in August, with the economy adding 9100 jobs, Bureau of Statistics figures released on Thursday show. Full-time positions rose by 5000 while part-time jobs went up 4100.
The gain in jobs failed to offset the 10,800 positions lost in August, while the participation rate, the percentage of people either in work or looking for work, slipped to 64.9 per cent - the lowest since November 2006. The participation rate has fallen 0.5 percentage points since the beginning of the year. The aggregate monthly hours worked fell to 1.6 billion hours in seasonally adjusted terms.
The dollar fluctuated wildly following the data release, before settling at about US94.60¢. It was buying US94.02¢ in late trade.
"Given falling participation and only modest jobs growth, the report cannot be characterised as strong," HSBC economists Paul Bloxham and Adam Richardson said. The unrounded estimates of the jobless rate also showed a fall closer to 0.1 percentage points.
Even so, analysts said the fall in the jobless rate suggested some stabilisation in economic conditions. The fall in the headline rate also further reduced the odds of another easing by the Reserve Bank next month. Financial markets agreed, paring back their expectations of a November rate cut to 11 per cent from 8 per cent on Thursday, Credit Suisse data showed.
"The RBA will be sitting on their hands for another month come Melbourne Cup day," NAB senior economist David de Garis said, adding that there was "no fuel" in the new data.
In seasonally adjusted terms, the jobless rate fell in NSW, South Australia and Western Australia, but rose from 5.7 to 5.8 per cent in Victoria. It remained steady in Queensland and Tasmania at 5.9 and 8.3 per cent respectively. In trend terms, the jobless rate stayed at 5.5 per cent in the Northern Territory, and rose slightly in the ACT to 4.1 per cent.
While the recent improvements in business and consumer confidence indicators were expected to improve future hiring levels, economists still expect the unemployment rate to tick up over the next few months - possibly up to 6 per cent by the year-end - as growth continued at a sub-trend pace.
At the same time, the strong growth in population size has meant not enough jobs were being created each month to keep up with the expansion of the labour force.
Meanwhile, the RBA was expected to keep rates at a low level as other sectors of the economy attempt to fill the gap left by the fading mining investment boom. Several economists have shifted their forecasts for the next cash rate cut to next February.
"It remains far from certain that the transition in Australia's growth drivers will be relatively smooth once mining investment begins to fall sharply from around mid next year," ANZ economists Justin Fabo and Dylan Eades said.
Frequently Asked Questions about this Article…
The unemployment rate fell to 5.6% from 5.8% last month, with the economy adding 9,100 jobs. Full‑time positions rose by 5,000 and part‑time jobs increased by 4,100, though that gain did not fully offset the 10,800 positions lost in August.
The surprise fall in the jobless rate cooled market hopes of an immediate Reserve Bank (RBA) rate cut. Analysts said the headline fall reduced the odds of a November easing, and some economists have pushed their next cash‑rate cut forecasts out to around February.
Most economists describe the labour market as still soft. HSBC economists said the report couldn't be characterised as strong because participation has fallen and jobs growth was modest. Some forecasters even expect unemployment to tick up again toward 6% by year‑end.
The participation rate slipped to 64.9% — the lowest since November 2006 — which means fewer people are in work or actively looking. A falling participation rate can mechanically lower the unemployment rate even when underlying labour‑market strength is weak, so investors should look beyond the headline unemployment figure to participation and hours worked.
The Australian dollar fluctuated after the data release before settling at about US94.60c, having traded around US94.02c in late trade. Currency moves reflected the change in market expectations for monetary policy after the jobs news.
Yes. In seasonally adjusted terms the jobless rate fell in New South Wales, South Australia and Western Australia, rose slightly in Victoria (from 5.7% to 5.8%), and remained steady in Queensland and Tasmania at 5.9% and 8.3% respectively. In trend terms the Northern Territory stayed at 5.5% while the ACT rose a little to 4.1%.
Economists expect the RBA to keep rates low as other sectors try to make up for the fading mining investment boom. ANZ economists warned the transition away from mining investment may not be smooth once mining investment falls more sharply next year, which is an important consideration for sector allocation.
Treat the report as mixed: the headline unemployment fall reduced immediate odds of an RBA cut, but underlying signals — falling participation, lower hours worked and modest job gains — point to ongoing softness. Keep an eye on labour‑market trends and RBA guidance, review sector exposures (especially to mining and sectors expected to fill the gap), and avoid making knee‑jerk changes based on a single monthly print.
Call 1300 880 160
Start a chat
Schedule a call
