Jobless figures cut need for rate rise

The loss of nearly 31,000 full-time jobs last month has taken the gloss off a
further stabilisation in the jobless rate, but has reduced the likelihood of an
imminent interest rate rise.
Financial markets have wound back their expectations to fully price in just one 25
basis point rate rise in December, rather than the possibility of three before the
end of year - as predicted earlier in the week.
The August labour force report released on Thursday showed that the jobless rate
remained at 5.8 per cent for a third straight month, while the total number of
people employed fell by 27,100.
Economists had expected an increase in the unemployment rate to 5.9 per cent, with
employment declining by 15,000.
Prime Minister Kevin Rudd said the data was a "cause for concern" and highlighted
the need to maintain the government's stimulus strategy.
The opposition said with both unemployment and economic growth behaving better than
forecast, now was the time to stop spending.
TD Securities senior strategist Annette Beacher believes there is absolutely no
justification for a near term interest rate rise.
"Falling June and July retail sales, weak July housing finance and the fourth
consecutive chunky slump in full-time employment cannot be glossed over," Ms Beacher
said.
Employment Minister Julia Gillard said the jobs figures contained "some troubling
aspects".
"We do anticipate that unemployment will continue to rise," she told reporters in
Canberra
As well as the overall loss of jobs - including 30,800 full-time positions - there
was also a decline in the participation rate, suggesting people were becoming
discouraged from looking for work.
There was, however, a further modest rise in part-time workers, which stand at a
record high of 3.21 million.
In the May budget the government forecast an unemployment rate of 8.25 per cent by
mid-2010, rising to 8.5 per cent by mid-2011.
Those forecasts would be updated in the mid-year budget review due later this year,
Ms Gillard said, noting that market economists were forecasting a lower peak for
unemployment, although still higher than the current level.
Opposition treasury spokesman Joe Hockey remained unconvinced that the government
needed to complete all of its planned stimulus spending.
"The unemployment rate is less than what they projected, the growth rate is better
than they projected, yet they are spending the same amount of money and they are not
changing it," Mr Hockey told reporters.
Last week the June quarter national accounts recorded a 0.6 per cent rise in annual
gross domestic product growth when the government had forecast no growth for
2008/09.
Mr Rudd said without the stimulus, the country would be "in the depths of recession"
and unemployment would have reached 10 per cent.
With it, the jobless rate is below the OECD average at some 8.3 per cent, and stands
only second behind Japan, which has a rate of 5.7 per cent.
Macquarie Research senior economist Brian Redican expects the jobless rate will
drift higher as the economy struggles to create enough jobs to accommodate all the
people entering the labour force.
The first phase of the economic recovery will also see employers lengthen working
hours - reversing the current trend - rather than hire more people, resulting in
disappointingly weak jobs growth.