Jobless numbers to grow despite new surge in confidence
The jobless rate has risen steadily from 5 per cent at the start of last year to 5.4 per cent. Economists expect it to reach 5.5 per cent when new data is released on Thursday, and most are tipping it to continue its rise towards 6 per cent by the end of the year.
Much attention has been focused on widely reported job losses in the broader manufacturing sector, which has been undergoing a painful structural shift for some time, often exacerbated by the high Australian dollar.
Building products supplier CSR announced this week that 150 jobs would go, hot on the heels of rival Boral cutting 700 jobs last month. And car manufacturers Holden, Ford and Toyota have all shed jobs.
The slowdown in the resources sector has also prompted contractor UGL to cut 700 jobs from its mining division, while there have been significant job losses in sectors as wide-ranging as media, aviation and financial services.
And yet the economy, as a whole, has been consistently adding jobs, including 10,400 in January, largely thanks to the growing healthcare and education sectors.
Economists are tipping Thursday's data to show a further 10,000 jobs were created last month.
But the new jobs are not keeping pace with population growth.
Tom Kennedy, an economist at JPMorgan, is tipping 25,000 new jobs to have been created last month, but says that will barely "tread water" with the growth in Australia's population.
He said the raw measure of employed people as a ratio of the country's total population was at its lowest since 2007.
"It's a general indicator that the labour market is a lot softer than the 5.4 per cent unemployment rate indicates," Mr Kennedy said.
Optimism has flooded back into equity markets in recent months, house prices have rebounded and a Westpac gauge of consumer confidence, released on Wednesday, was surprisingly strong.
But Westpac's chief economist, Bill Evans, said the jobs market remained weak, and could prompt further rate cuts if it persisted.
"Last month, despite a 7.7 per cent increase in the overall consumer sentiment index, there was no improvement in the already elevated level of anxiety around job security," he said. "Sustained improved confidence levels will require improving prospects in the labour market. Until those signals become apparent, supported by improving business confidence, the Reserve Bank is likely to retain its clear easing bias."
St George chief economist Hans Kunnen said it was too soon for the recent improvement in business and consumer sentiment to affect the jobs market.
"We acknowledge there has been a pick-up in sentiment but we're just not sure that's going to flow through to the labour market quite yet," he said.
Frequently Asked Questions about this Article…
Unemployment has been drifting higher — from about 5% at the start of last year to 5.4% now. Economists expect the rate to be around 5.5% in the next report and many forecast it could rise toward 6% by year‑end. For investors, a rising jobless rate can signal softer consumer spending and earnings pressure for cyclical companies, and it may influence market sentiment and interest rate expectations.
The article cites job cuts at building products supplier CSR (about 150 jobs) and Boral (about 700 jobs). Carmakers Holden, Ford and Toyota have also shed staff, and contractor UGL cut roughly 700 jobs from its mining division. Broader losses have been seen in media, aviation and financial services, while healthcare and education were adding jobs.
Although the economy added jobs (10,400 in January and economists expect about 10,000 in the most recent month), these gains are not outpacing population growth. JPMorgan economist Tom Kennedy suggested a larger figure of 25,000 jobs but said even that would only barely 'tread water' against population increases. For investors, employment per capita falling (the employed‑to‑population ratio is at its lowest since 2007) can mean weaker demand growth than headline job numbers imply.
Consumer confidence indicators have rebounded (Westpac's gauge rose about 7.7%), and equity markets and house prices have improved. However, Westpac chief economist Bill Evans noted there was no reduction in anxiety about job security. Without clearer improvements in the labour market and business confidence, sentiment gains may not be sustained — a crucial point for investors watching consumption‑driven companies.
Yes — the article says a persistently weak jobs market could prompt further rate cuts. Westpac's Bill Evans suggested the Reserve Bank is likely to retain an easing bias until labour market signals improve. Investors should consider how lower rates affect sectors differently: rate‑sensitive assets like property and growth stocks may benefit, while banks and some financials could face margin pressure.
Healthcare and education were adding significant jobs and helped drive overall employment growth. In contrast, manufacturing (including building products and car manufacturing), mining contractors, media, aviation and parts of financial services have been shedding jobs.
Headline unemployment rates can be misleading. Economists in the article note that raw measures like employed people as a share of the population are at lows not seen since 2007, suggesting the labour market is softer than the 5.4% unemployment rate implies. Everyday investors should look beyond the headline rate — considering labour‑force participation, jobs per capita and sectoral trends — to assess economic momentum.
Job cuts at CSR, Boral and UGL point to sectoral stress in manufacturing, building materials and the resources services sector. While concerning for those specific companies and suppliers, the broader economy is still adding jobs in healthcare and education. Investors should assess exposure to the affected industries, monitor earnings guidance from those companies, and weigh diversification and risk management rather than reacting only to isolated layoffs.
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