WA jobless rate falls to 5.4% in August

Western Australia's unemployment rate has recorded the largest drop in August compared to other states while the nation's jobless rate remains steady at a seasonally adjusted 5.8 per cent, new figures show.

The Australian Bureau of Statistics said WA's unemployment rate fell 0.3 per cent from July to 5.4 per cent, seasonally adjusted, in August.

The number of unemployed persons in the state dropped from 68,900 to 65,700 as persons in full-time jobs increased from 796,900 to 809,200.

Total employment rose from 1.148 million in July to 1.16 million. The state's participation rate increased slightly from 68.2 per cent to 68.5 per cent.

The jobless rate in New South Wales was unchanged at 6.1 per cent, and was also static in the Northern Territory at 4.2 per cent and the ACT at 3.6 per cent.

However, it jumped to 5.1 per cent in Tasmania from 4.1 per cent the previous month, and increased to 6.3 per cent from 5.9 per cent in Victoria.

The unemployment rate also rose to 5.8 per cent from 5.7 per cent in South Australia while in Queensland it declined to 5.5 per cent from 5.7 per cent.

Meantime, Australia's unemployment rate was steady for a third straight month in August, but an ailing full time job market and lower participation rate will quash the chance of a near term interest rate hike, economists say.

Australia's unemployment rate was a seasonally adjusted 5.80 per cent in August, compared with an unrevised 5.80 per cent in July and June.

ANZ economist Riki Polygenis said the ABS report was the latest in a series of economic indicators that suggest the Reserve Bank of Australia would hold rates steady until the end of 2009.

"Employment is a key driver of household spending and the capacity to spend. It's not a positive signal of household spending going forward but it's held up better than everyone expected to date," she said.

"There doesn't seem to be any immediate need to hike rates given the particular concern that they have expressed about household spending once stimulus fades.

"I think together with yesterday's falling retail sales there is a very slim likelihood that the RBA will hike rates in October."

Total employment fell by 27,100 to 10.764 million in August, seasonally adjusted, the ABS said.

Full-time employment fell by 30,800 to 7.554 million in the month and part-time employment was up 3,800 to 3.210 million.

The participation rate in August was 65.1 per cent, compared with 65.3 per cent in July.

The median market forecast was for total employment to have declined by 15,000 in August, an unemployment rate of 5.9 per cent and a participation rate of 65.3 per cent.

"The participation rate is not really a positive signal and suggests that perhaps people are being a little discouraged by their employment prospects and have stopped looking for work.

"That's common during economic downturns."

The central bank has kept the cash rate at a 49-year low of three per cent since April.

Yesterday, the ABS published retail trade figures showing a 1.0 per cent drop in July, worse than the 0.5 per cent drop expected by economists.

St George chief economist Besa Deda said that while the employment rate was deteriorating, it was showing some resilience as employers tried to retain staff.

"Part time employment continues to grow, but the deterioration in full time employment we've seen in recent months is continuing.

"It's further evidence that there's labour market flexibility and employers are using that flexibility to try and, where needed, wherever possible hang onto employees.

She said that an October rate hike was slim, but a November, December boost in the cash rate was still on the table.

"But the RBA might wait until next year," she said.

"You're seeing some tentative evidence that spending might have been pulled forward into the first half of this year.

"We're seeing a bit of an unwinding effect occurring.

In early August, the debt futures market priced in a 100 per cent chance of a 25 basis point interest rate rise in November.

But some commmentators have speculated the rise could come as soon as October.

Commonwealth Bank senior economist John Peters said the rise in job losses was greater than expected but the drop in the participation rate kept the rate of unemployment steady in August.

The participation rate was the lowest since July 2007.

"What it is showing is the easing in the modest growth over the last 12 months has translated into job losses and will do so into the future," Mr Peters said.

"But, overall, we think unemployment will peak between 6.5 and 7 per cent in the first or second quarters of next year as we see the economy picking up from here in growing modestly in the next 12 months."

The unemployment rate would keep rising while the economy grew at a sub-trend pace, but the peak would be lower than many analysts had forecast earlier this year, Mr Peters said.

The national economy needs to grow at an annual rate of three per cent to absorb the new entrants into the work force.

Australia's economy grew by 0.6 per cent in the year to June 30, ABS data showed last week.

"We will see unemployment continue to rise and job losses in the coming months as labour force is a lagging indicator," Mr Peters said.

"But they are not going to get an unemployment rate anywhere near the forecast in the budget of 8.5 per cent."

"That is because many employers had problems in getting staff before the financial crisis, so they are tending to hoard people instead of letting them go as they are looking towards the recovery."

Mr Peters said the weaker-than-expected job losses and fall in retail sales would throw some "cold water" on expectations the RBA would lift interest rates from next month.

The ABS said on Wednesday retail sales fell by one per cent in July, after declining by 0.8 per cent the previous month.

"Our view is that the Reserve Bank will want to make sure that growth is durable," Mr Peters said.

"They will want to ensure consumer spending continued to hold up, so they will need a couple more months of reports there."

Mr Peters said CBA forecasts that the RBA will begin lifting the cash rate next February.

AMP Capital Investors chief economist Shane Oliver said the labour force report was, on balance, good news.

"The very fact that the unemployment has been flat at 5.8 per cent for three months now and that it's lost upwards momentum over the last six months suggests that the labour market is starting to bottom out," Dr Oliver said.

"Historically, the movements in the unemployment rate have tended to provide a better guide to how the labour market is behaving, rather than the monthly moves in employment."

Dr Oliver said the signs that the unemployment rate was close to the top "sends a signal that people can become a lot more confident about keeping their jobs going forward".

"People lost confidence late last year and into early this year because they were fearful of losing their jobs," Dr Oliver said.

"Now with a steady flow of more positive news on the economy and the huge surge in the unemployment rate that was feared failing to materialise, people are starting to feel a lot more confident about the future.

"That in turn feeds into measures of consumer confidence and people's willing to spend."