Unemployment unexpectedly drops as 37,700 jobs added

Updated

Australia's unemployment rate has unexpectedly dropped to 6.1 per cent as an estimated 37,700 jobs were added to the economy.

The Bureau of Statistics estimates that 31,500 of those jobs were full time, with 6,100 extra part-time positions.

The March unemployment rate decreased less than 0.1 of a percentage point from a downwardly revised 6.2 in February (originally reported as 6.3).

Economists surveyed by Bloomberg were typically expecting 15,000 jobs to be added and unemployment to remain steady at 6.3 per cent, but there was a considerable split of views.

The Australian dollar jumped on the data, rising from 77.15 just before 11:30am (AEST) to 77.7 just after, having already posted a gain of around 1.5 cents overnight against the greenback on weak US data.

The detail of the March data was also good, with participation - the proportion of over-15-year-olds in work or looking for it - moving higher from 64.7 to 64.8 per cent.

The aggregate number of hours worked in Australia last month also rose 0.3 per cent, seasonally adjusted.

Even the more stable trend figures, which smooth out monthly volatility, remained steady at 6.2 per cent unemployment, while participation rose.

Economists say the March figures make a May rate cut less likely, explaining the bounce in the Australian dollar on the data.

However, Stephen Walters said the increase of around 80,000 jobs over February and March seems unrealistic raising further doubts about the reliability of the ABS labour force survey, which underwent a major review after wild data swings last year.

"The Bureau of Stats has obviously had a revaluation of the methodology around the seasonal factors," JP Morgan's chief economist told Reuters.

"One of the outcomes of that is the survey is not perhaps as credible as it was previously."

Mr Walters told Reuters there are a number of factors that lead him to think the Reserve Bank will cut rates next month in spite of the positive jobs data.

"The currency is up quite a bit after this number, inflation next week is probably going to be quite low, business confidence is low, consumer confidence is low, iron ore prices are plunging so the case [to cut] is still there, it just makes it slightly less likely," he said.

CommSec economist Savanth Sebastian said that the data pushed market bets on an official rate cut in May down from 73 to 56 per cent, with a stronger jobs market likely to result in a virtuous cycle of improved retail spending.

"Last year employers were working existing staff longer and there had been a lift in productivity, while it is now clear that employers are adding to the workforce – whether it is part-time or full-time roles," he wrote in a note on the figures.

"A healthier economy, improved job prospects and, more importantly, a noted lift in job advertisements have resulted in more people searching for work and finding employment, a result that should increase household incomes."

Topics: economic-trends, unemployment, australia

First posted