Unemployment ticked up to 5.8% in Australia. This data hinted on Reserve Bank of Australia to cut to interest rates in the next six months with increase to 70% from 60%. AMP Capital chief economist Shane Oliver in an interview said. “While stronger housing-related indicators and the recent boost to confidence, if sustained, suggest that we are either at or very close to the bottom for interest rates in Australia the weak job report highlights that the risk for interest rates is still on the downside.”
The Australian foreign exchange trading market appears to be dormant ahead upon this news release. The Australian dollar US92.49 US cents in the close of foreign exchange trading versus 92.86 US cents of the previous FX trading day. Similarly, The AUD has fallen in the local foreign exchange trading market after release of news on unemployment that jobless rate reached a four-year high in August.
The weak labour market points to the risk of lower rates. Barclays’ stance is that rates remain on hold, but the rise in unemployment over the past year and the poor result for jobs in August suggest that the balance of risks is still tilted to lower rates. That said, the contrast between modest job losses and increasing hours worked is unusual: the job losses would ordinarily raise doubts about the strength of GDP in third quarter. But this is tempered by the strength in hours worked. Business confidence picked up sharply in anticipation of a coalition victory in the September election and could improve further, but we are agnostic as to whether this will be followed by a material change in hiring and investment plans.
The unemployment rate rose from 5.7% to 5.8% in August with Barclays analyst estimate at 5.7% versus analyst consensus estimate of 5.8%. The unemployment rate was 5.8% from year ago levels. The participation rate ticked down from 65.1% to 65.0%. A year ago it was 65.1%. By state, the weakness in unemployment was in Western Australia (5.0%, up 0.5 percentage point in the month), New South Wales (5.9%, up 0.2 percentage point) and Tasmania 98.3%, up 0.1 percentage point). Unemployment was unchanged in Queensland (6.0%) and Victoria (5.7%) and fell in South Australia (6.8%, down 0.2 percentage point).
Astonishingly, local businesses are increasing hours worked rather than hiring more staff. The average number of hours worked continued to climb, up 0.3% in in August and up 0.7% over the past year (up 1.1% for full-time workers and 0.5% for part-time staff). This is the fastest growth in average hours worked since about middle of 2010. It therefore indicates that companies are increasing hours worked rather than hiring new staff, although we caution that hours worked are volatile and poorly measured.