Jobs data pushes rate cut

Weak numbers suggest Reserve Bank will move

THE jobless rate edged higher to a seasonally adjusted 5.3 per cent in August, bolstering the case for another Reserve Bank rate cut as soon as next month.

A surge in people with parttime work boosted net employment by 34,700 to 12.93 million during the month, according to data yesterday from the Australian Bureau of Statistics, but underemployment ticked higher on a 15,500 decrease in people with full-time work.

Most economists had expected the unemployment rate to remain unchanged at 5.2 per cent for a fifth consecutive month, despite dual rate cuts by the Reserve Bank and government tax stimulus supposedly initiated to counter jobs market slack, low wages growth and low household consumption.

The participation rate also continues to climb, edging up to a new record of 66.2 per cent during the month, indicating the demand for labour is being met with increased supply.

BIS Oxford Economics senior economist Sean Langcake said this was keeping a firm lid on wages growth.

“While today’s move is only a small one, it does provide further evidence that the labour market may be losing some momentum,” Mr Langcake said yesterday.

Unemployment was the key metric cited by the RBA in its decision to cut rates in both June and July to a record low 1.0 per cent, with a third cut to 0.75 per cent already completely priced in by the market for November.

The RBA has indicated it will cut again if needed, but has repeatedly called on government to pitch in if it is to hit its long-term jobless goal of 4.5 per cent.

Economists widely expect the RBA to cut rates once more this year – in either October or November – with a further cut to 0.5 per cent predicted early in the new year.

ANZ economist Felicity Emmett said yesterday’s result should be enough to prompt another 25 percentage point cut next month.

Callam Pickering, APAC economist at Indeed, said conditions would probably get worse before the labour market improved, especially after the economy recorded its softest growth since the global financial crisis during the June quarter.

“There is also a growing divergence between employment growth and growth in hours worked,” Mr Pickering said.

“That suggests that while the economy is still creating jobs it isn’t necessarily creating the same quality of jobs as it was a year or two ago.”