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…
May’s official jobless rate fell to a seasonally adjusted 5.5% as the economy added 1,100 jobs. The participation rate slipped to 65.2%, and April’s unemployment was revised up from 5.5% to 5.6%.
Yes — the surprise fall in the unemployment rate could keep a July cut in the cash rate at bay. HSBC’s chief economist for Australia said the data meant the Reserve Bank would not feel under pressure to ease the cash rate at its next meeting on July 2.
The May data showed 6,400 part‑time jobs were added while 5,300 full‑time positions were lost. Aggregate hours worked fell by 11.5 million to 1,628.5 million, and the employment‑to‑population ratio dipped to 61.6%. Those signs point to softness in the labour market despite the small fall in the headline unemployment rate.
Citi’s chief economist Paul Brennan said fears of a sharp employment fall weren’t borne out but that the data still point to labour‑market softness — full‑time jobs have been flat over four months and participation is below year‑ago levels. ANZ’s head of Australian economics Ivan Colhoun noted trend employment growth is modest (about 10,000 jobs a month) and other job indicators suggest the jobless rate will likely continue to edge up.
SEEK reported new job advertisements fell for a fourth straight month, down 3.2% in May, with particularly sharp declines in Western Australia. Falling job ads can foreshadow weaker hiring and slower wage/earnings growth, which is relevant for sectors sensitive to consumer demand and wages.
The Australian dollar initially gained almost 1 cent to around US95.22¢ just after the release, then pulled back and was trading near US94.79¢ later. The sharemarket dropped more than 0.5% in a half‑hour global rout soon after the figures, though it recovered some losses and closed lower for the day.
Yes. In seasonally adjusted terms the jobless rate rose most in New South Wales, jumping 0.3 percentage points to 5.6%. It increased by 0.1 points in Queensland and South Australia, and fell in Victoria and Western Australia.
The report shows mixed signals: a small fall in the headline unemployment rate but underlying weakness in full‑time jobs, hours worked and job ads. Economists quoted in the article see ongoing softness, which reduces immediate pressure on the RBA to cut rates. For investors, that means interest‑rate expectations and sector sensitivity (for example, property and interest‑rate‑sensitive stocks) could be affected while broader market volatility can rise around such data releases.
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