Unemployment rate jumps to 6%

Australia’s unemployment rate has jumped to 6 per cent, surprisingly tracking against the momentum of previous months and lifting to its worst level since August.

The Australian Bureau of Statistic said today that 7,900 jobs were lost over January, while the number of unemployed people ballooned by 30,200, leading to a higher seasonally adjusted jobless rate of 6 per cent.

The unexpected lift in the jobless rate went against the forecasts of economists. Analysts surveyed by Bloomberg had forecast unemployment would hold steady at 5.8 per cent, and that the economy would add around 13,000 jobs.

The Australian dollar slumped on the news, dropping from US71.8c to US70.4c as the data was released.

January’s employment figures came alongside a steady 65.2 per cent participation rate, which shows the proportion of the population that have a job, are looking for work or are ready to start working.

However, the trend rate for unemployment, which strips out month-to-month volatility, inched lower to 5.8 per cent in January from an upwardly revised 5.9 per cent a month prior.

It’s a continuation of the positive trend basis from last year, where the unemployment rate decreased over the 2015 calendar year from 6.2 per cent to 5.8 per cent.

“The trend shows that around 302,000 more people were employed in January 2016 than in January 2015 and full-time employment growth was a bit stronger than part-time growth over the year, increasing by 169,800 people,” general manager of the ABS macroeconomic statistics division Bruce Hockman said.

Local tourism, hospitality, consumer, business and financial services are benefiting from the lower Australian dollar, which has fallen around US10c since the beginning of 2015.

ANZ senior economist Justin Fabo said January’s data was “the correction we had to have”.

Over October and November 130,000 jobs were created nationwide, while jobs then fell by 1000 in December.

Mr Fabo said the past two months of falls does not mean the labour market has hit a wall, stressing employment growth was still 24,000 per month in the six months to January.

“The weakness in today’s labour force report should be heavily discounted, just as the previous outsized gains in employment were treated with a grain of salt,” he said.

CommSec chief economist Craig James said recent sharemarket volatility may have caused employers to delay taking on new full-time staff, allowing existing workers to do longer hours instead or taking on part-time staff.

The number of part-time jobs was up by 32,700 in January, while full-time employment fell 40,600.

“(But) the outlook for the job market remains positive, with lead indicators like vacancies and job ads still rising,” Mr James said.

CommSec expects the jobless rate will continue to drift lower this year towards 5.5 per cent.

JP Morgan economist Tom Kennedy tipped the unemployment rate to range between 5.8 and 6.2 per cent for up to a year.

He said January’s number won’t be a rate cut trigger for the Reserve Bank, and expects interest rates to remain firmly on hold in the near term.

“We know the RBA don’t pin too much significance on just one print, they’re looking at how things play out over a six-month time horizon,” he said.

St George senior economist Janu Chan says job growth has weakened to a more realistic level given the below-trend pace of economic growth.

“Nonetheless, today’s data will add to the RBA’s doubts about the recent underlying strength in the labour market,” she said.

A bigger pullback in coming months will raise the chances of further easing, particularly if uncertainty in global financial markets remains high, she said.

--With AAP