Jobless rise no guarantee of rate cut, economists say
THE higher jobless rate is further evidence of a softening economy, but is not sufficiently weak enough to justify an interest rate cut next month, economists say.
The unemployment rate rose to 5.4 per cent in December from an upwardly revised 5.3 per cent in November, as the number of employed people fell by 5500, the Bureau of Statistics said. Full-time employment decreased by 13,800 to 8.1 million. Part-time employment rose by 8300 to 3.4 million, driven by a rise in male part-time workers.
New South Wales and Victoria added 8000 and 14,000 jobs respectively, while Queensland recorded 22,900 job losses.
Economists said while total employment numbers had fallen more than expected, the Reserve Bank had anticipated the rise as the number of people entering the market exceeded the number of jobs being created.
"We don't think these are the kinds of numbers that would induce a rate cut from the RBA soon," said CommBank senior economist Michael Workman.
"They've been indicating for six to nine months while they [were cutting] rates that these were the kinds of outcomes they were expecting on the jobs market. So we've ended up with a 3 per cent cash rate because of the expectation that this was going to happen."
The market has priced in at least one more interest rate cut this year after the Reserve Bank's easing to 3 per cent in December. But analysts said a cut was more likely in March rather than next month.
"We believe that the Reserve Bank will need further evidence of economic weakness before they act," ANZ senior economist Riki Polygenis said. "In particular, we think they would like to see capital expenditure in intentions, which comes out in late February. We will get the first read for 2013-14, and the outlook for investment in the non-mining economy is critical."
Ms Polygenis said that by early March, the Reserve Bank would have further data on retail sales and the labour force, which would give it a clearer view on the trend in employment.
Economists expect the unemployment rate to rise in 2013 as the mining investment boom peaks and the Australian dollar remains strong.
More than 1000 jobs were axed this week alone. On Wednesday, building products maker Boral said it would cut 700 office jobs, while BlueScope Steel outlined plans on Monday to sack 170 workers as part of a reconfiguration of its Hastings plant in Victoria.
Vodafone also said on Wednesday it was set to close or rebrand the Crazy John's chain of mobile phone stores by February 20, putting at risk about 300 jobs.
Last week, the National Australia Bank tipped the unemployment rate to rise to about 5.75 per cent later this year, and slashed its interest rate forecasts for 2013 from 3 per cent now to 2.25 per cent by the September quarter.
ANZ said it also expected the unemployment rate to rise to about 5.75 per cent by mid to late 2013.