Jobless numbers to grow despite new surge in confidence
Unemployment will worsen despite a resurgent sharemarket and improving consumer sentiment.
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.