Weak jobs data unlikely to trigger rates action

AAP
Jan 16, 2014, updated Jan 16, 2014

A soft labour force market is not expected to trigger further interest rate cuts because the Australian dollar is weakening.

Unemployment in December was unchanged at 5.8 per cent, the Australian Bureau of Statistics’ seasonally adjusted figures show.

The total number of people with jobs fell 22,600 to 11.630 million in the month.

The median forecast for the unemployment rate was 5.8 per cent in December, with total employment growth of 5,000, according to an AAP survey of 14 market economists.

But full-time employment fell 31,600 to 8.068 million in December and part-time employment was up 9,000 to 3.562 million.

Commonwealth Bank economist Gareth Aird said despite there being no jobs growth in the past six months, he thinks its unlikely the RBA will make further cuts to the cash rate.

“We don’t think today’s numbers will sway the RBA to cut again,” Mr Aird said.

“They would probably want to see the Aussie dollar do most of the work in further easing monetary conditions.

“It does increase the risks of further cuts, but the main thing to keep an eye on is that the Aussie dollar is now comfortably below 90 US cents.”

The Australian dollar has fallen to the lowest level since July 2010.

The currency fell from 88.94 US cents to 88.27 US cents within 10 minutes of the labour force data.

Mr Aird said this will give businesses a lift and this will eventually flow through the economy.

National Australia Bank senior economist Spiros Papadopoulos said the falling participation rate, which came in at a seven year low of 64.6 per cent, was keeping the unemployment rate from rising.

“This is a soft outcome and it’s really just highlighting the very soft jobs growth we’ve seen in the economy over 2013,” Mr Papadopoulos said.

“We had jobs growth of only 0.5 per cent throughout the year.

“At that rate of growth, you should be seeing the unemployment rate moving higher but it’s being offset by the falling participation rate.

“There’s an element of an ageing population and people retiring but there would also be an element of people giving up (looking for a job) as well.”

NAB expects unemployment to reach 6.5 per cent by the end of 2014, Mr Papadopoulos said.