Surprise drop in Oz jobless rate
The Australian unemployment rate has fallen to 5.2 per cent in November, as a surprisingly strong economy added 13,900 jobs in the month.
The unemployment rate was down from 5.4 per cent from October, and well below economists' expectations of 5.5 per cent. It was the lowest jobless rate since August, according to the ABS.
The participation rate - the percentage of people either in work or looking for work - remained steady at 65.0 per cent.
Full-time employment decreased by 4200 jobs to 8.1 million, while part-time employment increased by 18,100 to 3.4 million. Total employment rose to 11.546 million, as unemployment decreased by 16,300 to 637,400.
The dollar jumped on the news, gaining about a quarter of a US cent to US$1.0478.
Labour market still 'soft'
But JPMorgan economist Tom Kennedy said the labour market was "quite soft" despite the fall in the unemployment rate, as participation remained weak.
"The reason the unemployment rate moved lower is because we had upwards revisions in the prior month for participation, and as a consequence, participation has actually decreased in this report," he said. "So effectively, there were less people looking for work in November, and because the economy added a very modest amount of jobs, that was enough to see the unemployment rate move lower.
"This is the second-weakest reading we have had since about 2007 so that's really saying that the underlying message is the labour market is quite soft."
Kennedy said he expected firms to lean more towards part-time employment in the coming months.
The increase in part-time employment reversed last month's strong growth in full-time employment. Kennedy said while this month's figures did not necessarily represent a trend, he expected firms to lean more towards part-time employment in the coming months.
"I would say that considering what is going on domestically, I would expect the composition of employment to lean more towards part-time over the coming months as firms prefer to hire part-time labour, rather than increasing their overheads dramatically by committing to full-time labour," he said.
Still case for a rate cut
RBC strategist Michael Turner said the fall in unemployment was a big shift from the rises over the past few months.
"But we see the data as still broadly pretty soft across the economy, so we still see a case for lower rates," he said.
The Reserve Bank of Australia on Tuesday cut its key cash rate by 0.25 percentage points to 3 per cent, the lowest setting in decades and matching the low hit during the peak of the global financial crisis in 2009.
Today's fall in the jobless rate comes as a surprise as several indicators have been pointing to weakness in the labour market.
ANZ's job ads series fell for an eighth month in November, and surveys of industry also point to a soft labour market. However, the Department of Employment's leading indicator of employment rose for a fifth month in December and it has a respectable track record in anticipating upturns in hiring.
The RBA expects the unemployment rate to rise only "a little further" in coming months, though many analysts see a risk it could go higher. A move towards 6 per cent would greatly add to the case for further cuts in interest rates.
The Australian economy is holding up well despite a very uncertain global environment, CommSec economist Savanth Sebastian said after the release of the jobless numbers.
"While there are a number of high profile company failures and job losses, beneath the surface small and medium-sized business are still keen to put on more staff," he said. "The anecdotal evidence is that it is hard to attract and retain staff and today's jobs figures back up these observations.
"The doomsters have got it wrong - again."
Sydney Morning Herald