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…
Yes. The article says unemployment has risen from 5.0% at the start of last year to 5.4%. Economists expect the official rate to be 5.5% in the next release and many are tipping it could climb toward 6.0% by the end of the year.
The article highlights broadly reported job losses in manufacturing (exacerbated by a high Australian dollar). Specific company cuts mentioned include CSR (about 150 jobs), Boral (around 700 jobs last month) and UGL (about 700 jobs from its mining division). It also notes that car makers Holden, Ford and Toyota have shed jobs, and there have been significant losses in media, aviation and financial services.
Yes. While some sectors are cutting staff, the economy has still been adding jobs overall. The article notes 10,400 jobs were added in January, driven largely by growth in the healthcare and education sectors. Economists were forecasting another roughly 10,000 new jobs in the most recent month.
Population growth matters because new jobs need to keep pace with the growing population to lower the unemployment rate. The article reports that even when jobs are being created, they may not be enough to keep up with population growth. JPMorgan economist Tom Kennedy said a recent 25,000‑job estimate would only 'tread water' against population increases, and the ratio of employed people to the total population is at its lowest since 2007.
According to the article, a weak labour market could prompt further interest rate cuts. Westpac's chief economist Bill Evans said persistent weakness in jobs and ongoing anxiety about job security support a clear easing bias at the Reserve Bank. For investors, that means monetary policy could remain accommodative, which has implications for equities, property and fixed‑income markets.
The article notes optimism has returned to equity markets and house prices have rebounded, and a Westpac consumer confidence gauge rose 7.7%. However, Westpac's Bill Evans pointed out there was no improvement in anxiety around job security — suggesting confidence gains so far haven’t yet translated into better labour‑market prospects.
The article doesn't give direct investment advice, but it highlights key signals investors should monitor: the unemployment rate, the distinction between headline job gains and jobs per capita, sectoral shifts (manufacturing and resources cuts vs. healthcare and education growth), and central bank easing bias. These factors can influence asset prices, so investors may want to consider portfolio diversification and watch monetary policy updates.
Not yet. St George chief economist Hans Kunnen told the article it's too soon to expect the recent pick‑up in business and consumer sentiment to flow through into stronger employment. Most economists quoted remain cautious and say improving labour‑market signals are needed to change the outlook.
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