Unemployment dip to stave off rate cut
The unemployment rate edged lower to a seasonally adjusted 5.5 per cent last month, as the economy added 1100 jobs.
The participation rate - the percentage of people working or looking for work - slipped to 65.2 per cent.
The April unemployment rate was revised up from 5.5 per cent to 5.6 per cent.
The dollar gained almost 1¢, rising from US94.38¢ just before the release to US95.22¢, before falling back to US94.39¢. It was trading at US94.79¢ late on Thursday.
The latest figures came just before the sharemarket dropped more than 0.5 per cent in half an hour of mayhem as part of a global rout. The market closed lower for the day, but was able to recover some of its losses.
Citi's chief economist, Paul Brennan, said fears that employment would fall sharply after April's gain of 50,000 positions were not borne out. But he said the new data continued to point to softness in the labour market.
"Full-time employment has been flat over the last four months, and the labour force participation rate remains below the levels of a year ago," he said.
The economy added 6400 part-time positions, but lost 5300 full-time ones.
The aggregate number of hours worked in May fell by 11.5 million to 1628.5 million. The employment-to-population ratio declined to 61.6 per cent from 61.7 per cent in April.
ANZ's head of Australian economics, Ivan Colhoun, said the trend growth in employment coupled with other job indicators suggested the jobless rate would continue to edge up," he said. "Overall, it's still not that strong. If you looked at hours worked, it's only up 0.6 per cent in trend terms over the year, and for the month they are below the levels of a year ago," Mr Colhoun said.
Meanwhile, the job search site SEEK reported on Thursday that new job advertisements had declined for the fourth straight month, falling by 3.2 per cent in May.
Job ads dropped off particularly sharply in Western Australia, where employment has been supported by the boom in mining investment. The jobless rate rose the most in seasonally adjusted terms in New South Wales, jumping 0.3 percentage points to 5.6 per cent. It lifted 0.1 points in Queensland and South Australia, but fell in Victoria and WA.
Mr Colhoun said that in trend terms, the economy was adding about 10,000 jobs a month, with about 8000 of them created in NSW.
HSBC's chief economist for Australia, Paul Bloxham, said the latest figures meant the Reserve Bank would not feel under pressure to ease the cash rate again at its next meeting on July 2.
Frequently Asked Questions about this Article…
The seasonally adjusted unemployment rate fell to 5.5% in May, with the economy adding 1,100 jobs overall.
Yes. The surprise dip in the May jobless rate could keep a July cut in the cash rate at bay — HSBC's chief economist for Australia, Paul Bloxham, said the latest figures meant the RBA would not feel under pressure to ease rates at its next meeting on July 2.
No. The data showed the economy added 6,400 part-time positions but lost 5,300 full-time jobs, and Citi's chief economist Paul Brennan noted that full‑time employment has been flat over the last four months.
The participation rate slipped to 65.2%, and aggregate hours worked fell by 11.5 million to 1,628.5 million. Those signs — plus a slight decline in the employment-to-population ratio to 61.6% — point to softness in the labour market despite the lower unemployment rate.
Economists were cautious: Citi's Paul Brennan said fears of a sharp employment fall were not borne out but the data still pointed to labour-market softness. ANZ's Ivan Colhoun said trend employment growth suggests the jobless rate would continue to edge up over coming months, with trend employment adding about 10,000 jobs a month (roughly 8,000 in NSW).
SEEK reported new job advertisements fell for the fourth straight month, down 3.2% in May. Declining job ads can be an early indicator of weakening labour demand, which matters for economic growth and company earnings prospects.
The Australian dollar briefly gained almost 1 cent — rising from about US94.38¢ to US95.22¢ — then pulled back to trade around US94.79¢ later. The sharemarket also dropped more than 0.5% in half an hour during a global rout before recovering some losses and closing lower for the day.
Investors should note that a lower headline unemployment rate can temporarily reduce pressure for an RBA rate cut, but underlying signs — flat full‑time employment, falling hours worked, weaker participation and declining job ads — point to softer labour-market conditions ahead. That mix could mean modest market volatility and continued scrutiny of economic data when assessing interest-rate and investment outlooks.
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