Jobless rate to rise amid iron ore slide
UNEMPLOYMENT is likely to worsen as a strong run of new jobs peters out.
About 120,000 jobs have been created this year, an average of 20,000 a month.
That brought the unemployment rate to 6 per cent last month after a 12- month low of 5.9 per cent in May, Australian Bureau of Statistics data showed yesterday.
But Macquarie senior economist James McIntyre expected the unemployment rate to rise, as business investment remained weak and the economy took time to benefit from a falling currency. “We still see the unemployment rate pushing up to about 6.5 per cent by the middle of 2016, that’s why we’re forecasting one more ( interest) rate cut and there’s a risk of further cuts,” he said.
“What the month on month jobs data doesn’t change is the investment outlook for the economy, and it doesn’t change the income hit from the slide in the iron ore price.”
Mr McIntyre said his job forecast may change if there were a depreciation in the Australian dollar, a swift resolution to the Greek financial crisis and a response to China’s effort to stimulate its economy.
“The currency is going to be helpful but even at 74 US cents, the Reserve Bank thinks that a further depreciation is likely and necessary,” he said.
ANZ senior economist Justin Fabo said he did not believe that the current level of jobs growth could be sustained when the economy had not fully recovered.
“Significant job losses are still forthcoming as several large resource projects are completed and commodity prices remain under pressure,” he said. “These factors will continue to weigh on household income and spending, and ultimately limit the upside for hiring.”
JP Morgan economist Ben Jarman said recent jobs numbers suggested the non- mining sector was doing some heavy lifting for the Australian economy overall.
“We’ve been sitting here with sub- trend growth still continuing but the labour market is doing better,” he said. “The non- mining economy gradually improving might be having a bigger bearing on the labour market have realised.”
But Mr Jarman said the figures did not reflect the recent Chinese stock market meltdown or the uncertainty over Greece’s future.
“Things are evolving pretty quickly on the global front, so this data doesn’t reflect the impact of what’s going on in Europe and what’s unravelling in China at the moment,” he said. “It’s probably too early to say the unemployment rate has peaked because you’ve still got the impact of that shock moving through the system.”