Australian Jobless Rate Falls

Unemployment Rate Falls

More than 45,900 jobs were created last month leading to a surprise drop in unemployment, according to official figures.
The overall unemployment rate fell to its lowest point in more than a year, from 5.2 in May to 5.1 percent in June. Total employment rose by 45,900 to 11.101 million in June, seasonally adjusted.

There was an 18,400 increase in full-time jobs with part-time jobs rising to 27,500, the Australian Bureau of Statistics reported.

 

Part Time Job Market Strong

“At face value the job market appears to be going gangbusters with over 45,000 jobs created in one month. But it is important to point out that job creation was focused on part-time staff in June while the number of hours in the economy also fell,” said Craig James, chief economist at Comm Sec. Mr James added that the result suggested that employers were becoming more cautious and were worried about the outlook for the global economy and weak spending by Australian consumers. The participation rate in June was 65.2 percent, up from an un revised 65.1 percent in May.

 

Interest Rate Rise Likely August

But RBC Capital Markets economist Su-Lin Ong said with the jobless rate now a fraction above the so-called full employment level of five per cent, an August interest hike was a very real possibility.
“It underscores not only the strength of the labor market but also the increasing tightness of the labor market,” she said
“It’s a factor when you think about the inflation outlook.
“We’re at a time when inflation is on the high side at a time when there’s pretty limited spare capacity.

 

Australian Dollar Stronger

Meanwhile, the Australian dollar grew half a US cent on the news, taking it to 87.22 US cents after the data was published at 1130 AEST. The ABS data showed the May jobless rate was downwardly revised to 5.1 per cent, which put the unemployment rate at a 15-month low that month. Nomura Australia chief economist Stephen Roberts said the data showed the surge in employment was matched by a surge in the work force.
“So both the supply and demand for labor are very, very strong through the course of (June),” he said.

He said the year on year change in employment, seasonally adjusted, was up 3.3 per cent.
“All that implies that we still have a relatively strong economy here, income is well supported,” Mr Roberts said.

But there was now an increased likelihood the RBA would raise the cash rate by the end of 2010, he said.
“There’s no real opportunity for them to lower rates at all, so it’s all about when they’re going to be lifting rates next,” he said.
“I think they may get through the August meeting, but I think they’ll be back to tightening policy again.
He said the RBA might wait for more information on the state of the global economy, particularly the US and the ongoing fiscal crisis in Europe.
“But there is a risk, there’s definitely a risk, they could raise rates in August,” Mr Roberts said.
“But if they haven’t raised in August, I think there’s an even higher risk that they will have raised them by the end of this year.”