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 Bureau of Statistics report showed the unemployment rate fell to 5.6% from 5.8% last month as the economy added 9,100 jobs. Full‑time positions rose by about 5,000 and part‑time roles by roughly 4,100, although these gains didn’t fully offset the 10,800 positions lost in August.
The surprise fall in the jobless rate cooled market expectations of an RBA cash rate cut next month. Financial markets pared back the odds of a November cut (Credit Suisse data cited the change), and several economists said the RBA is likely to ‘sit on its hands’ for at least another month, with some pushing the next likely cut out to around February.
The participation rate — the share of people working or actively looking for work — slipped to 64.9%, the lowest since November 2006 and down 0.5 percentage points year‑to‑date. A falling participation rate can mask underlying labour‑market weakness because fewer people are seeking work; HSBC economists said falling participation plus only modest jobs growth means the report can’t be characterised as strong.
HSBC noted that falling participation and modest job growth made the report far from a strong result. NAB’s senior economist said the RBA would likely wait another month, calling the data ‘no fuel’ for a cut. ANZ economists warned the transition away from mining investment may not be smooth as mining investment declines next year, adding uncertainty to the outlook.
The Australian dollar moved sharply after the data release, then settled around US 94.60 cents. In late trade it was reported buying about US 94.02 cents, showing the market initially priced and then re‑priced the news.
Yes. In seasonally adjusted terms the jobless rate fell in New South Wales, South Australia and Western Australia, rose in Victoria from 5.7% to 5.8%, and was steady in Queensland and Tasmania at 5.9% and 8.3% respectively. In trend terms it stayed at 5.5% in the Northern Territory and edged up to 4.1% in the ACT.
Most economists expect the unemployment rate to tick up over the next few months, potentially to around 6% by year‑end. Their view is based on sub‑trend economic growth and strong population gains meaning current monthly job creation may not keep pace with labour‑force expansion.
Investors should monitor monthly jobs numbers, the participation rate, aggregate hours worked, and business and consumer confidence indicators — all highlighted in the report — as well as central bank guidance from the RBA and developments in mining investment, which economists flagged as a key driver of the growth transition next year.
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