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Australia employment rises, but not fast enough
[SYDNEY] Australian employment rose moderately in February while the jobless rate ticked down from a decade high, yet faster growth will be needed to stop the unemployment rate from rising further over time.
Thursday's figures from the Australian Bureau of Statistics showed employment rose 15,600 in February and the jobless rate dipped a tenth of a percentage point to 6.3 per cent, on a rare occasion when the outcomes almost exactly matched market expectations.
One positive development was a solid 0.8 per cent increase in hours worked, which could be a precursor of stronger demand for labour.
The Australian dollar rose briefly as some had wagered on a softer outcome, but investors continued to price in a further cut in interest rates from the Reserve Bank of Australia (RBA) following its February easing. "The outlook is still for rising unemployment rate and further easing," said Michael Turner, a strategist at RBC Capital Markets. "We see one more rate cut this year in May and the jobless rate at 6.5 per cent." Interbank futures imply a 30 per cent chance of a quarter point cut to 2.0 per cent in April, while the probability rises to 84 percent by May.
The RBA has already conceded that with economy growing at a sub-par pace, the jobless rate would likely to rise a bit further and peak a bit later than earlier expected.
That in turn meant wages growth would stay sluggish - it is currently at the lowest in over a decade - and help restrain inflation in the service sectors of the economy.
The trouble is not that there is widespread job shedding but that new hiring is being outpaced by growth in the labour force, thus pushing the unemployment rate higher.
In all, 151,000 net new jobs were created in the year to February, but the workforce expanded by 203,500. In part that reflects a pace of population growth that far outstrips Australia's rich world peers and is considered a positive for the economy overall.
There are some signs the demand for labour is on the mend.
Figures from ANZ out this week showed job advertisements in newspapers and on the Internet rose for the ninth straight month in February to their highest in at least two years.
Householders are also becoming less fearful of losing their jobs with the Westpac-Melbourne Institute survey of unemployment expectations showing ongoing improvement in March. "So far in 2015 households appear to be getting more positive about the labour market...the trend is moving in the right direction," said Westpac senior economist Justin Smirk. "The improvement suggests that the recent rate cut may have already had an impact on expectations. We will have to wait to see if it translates thought to real economic activity."