Finance Work ‘Jaw-dropping’: Unemployment hits gloomy high, putting pressure on RBA

‘Jaw-dropping’: Unemployment hits gloomy high, putting pressure on RBA

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The federal government will again require job seekers to apply for a certain number of jobs, or risk having their dole cut.
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Australia’s unemployment rate has risen slightly to 5.3 per cent in official figures for January – with economists expecting it to keep rising.

The Australian Bureau of Statistics reported on Thursday the 0.2 percentage point rise came on the back of 29,000 jobs created over the month, with the participation rate remaining steady at 66 per cent.

But it noted the monthly growth in jobs was below the 20-year average.

Full-time employment increased by 46,200 and part-time employment decreased by 32,700, while unemployment increased by 31,000.

Callam Pickering, from global job site Indeed, described that 31,000 jump as “jaw-dropping”.

“That type of increase doesn’t happen all that often; the last time was in January 2016,” he said.

“One saving grace was the sharp rise in full-time employment … which more than offset a decline in part-time employment.”

But EY chief economist Jo Masters said unemployment had remained steady in trend terms since September 2019 – making no progress toward the Reserve Bank’s estimate of full-employment (4.5 per cent).

“With inflation below the policy target, economic growth below potential, and spare capacity in the labour market, the economy will continue to struggle with low wages growth, which flows through to household income,” she said.

“Against this backdrop, there continues to be argument for fiscal policy to provide some additional cyclical support, particularly given that interest rates are already so low and house prices are rebounding sharply.”

The biggest jump in the numbers of jobless in January were in Victoria, Queensland and NSW, while the number of jobs in South Australia fell by 900.

But Thursday’s figures also showed the number of underemployed people continues to rise. In January, it was up to 9 per cent of the workforce for the first time since May 2018.

The problem is most pronounced for younger workers, with nearly three in 10 of those aged 15-19 and more than one in six 20-25-year-olds indicating they’d like to be working more hours.

Underemployment is becoming a particular problem – especially among younger workers.

Economists predict further jumps in the jobless rate and a subsequent interest rate cut in coming months.

“Along with yesterday’s meagre wage growth print, these data show that there is still plenty of spare capacity in the labour market,” BIS Oxford Economics senior economist Sean Langcake said.

He expects jobs growth to lose momentum during 2020, slowing to less than 2 per cent.

“This will make it challenging to work through existing spare capacity, and we expect the RBA will cut rates in the first half of the year to aid this transition,” he said.

Capital Economics’ Ben Udy said the January data alone probably wouldn’t convince the Reserve Bank a cut to official rates was necessary, but he too predicted unemployment would continue to rise.

“If we are right, we think that will be enough to convince the RBA to cut rates by 25 basis points in April and July,” he said.

Greens leader Adam Bandt said Australia faced a jobs crisis.

“We’re going to start seeing businesses going to the wall (from climate change) and we’re going start seeing people, especially young people, never enjoying a secure job in their life unless we come up with a plan to tackle these crises,” he told Sky News.

-with AAP

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