Job­less rate to rise amid iron ore slide

Townsville Bulletin - - NEWS -

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.”

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