09/07/2009 - 09:39

WA jobless rate hits 5-yr high at 5.1%

09/07/2009 - 09:39

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The state's unemployment rate has climbed to a seasonally adjusted 5.1 per cent in June from an upwardly revised 5 per cent recorded the previous month, the Australian Bureau of Statistics said today.

The state's unemployment rate has climbed to a seasonally adjusted 5.1 per cent in June from an upwardly revised 5 per cent recorded the previous month, the Australian Bureau of Statistics said today.

The latest jobless rate for Western Australia is a five-year high, with the figure not having reached the 5.1 per cent mark since June 2004.

ABS figures show WA's participation rate had decreased from a seasonally adjusted 69.5 per cent in May to 68.8 per cent as total employed people dropped from 1.172 million to 1.161 million.

The number of people employed at a full-time capacity dropped from 831,300 in the previous month to 815,700.

The total number of people unemployed in WA rose from 61,400 in May to 62,300, seasonally adjusted.

Nationally, the unemployment rate was a seasonally adjusted 5.8 per cent in June, compared with an unrevised 5.7 per cent in May.

Total employment fell by 21,400 to 10.763 million, in June, seasonally adjusted.

Full-time employment decreased by 21,900 to 7.612 million in the month and part-time employment was up 400 to 3.151 million.

The participation rate in June was 65.3 per cent, compared with 65.4 per cent in May.

The median market forecast was for total employment to have declined by 20,000, an unemployment rate of 5.9 per cent and a participation rate of 65.4 per cent.

Citi senior economist Josh Williamson said the figures supported the view that the Reserve Bank of Australia (RBA) was probably finished cutting interest rates.

"This report doesn't add anything to the case for interest rate cuts," Mr Williamson said.

"I think it probably fits more more with the RBA's view that the glass is half full at the moment, and the fact that certainly the impact on the labour market could be less than was feared three or six months ago."

The RBA has kept the cash rate unchanged at a 49-year low of 3 per cent for the past three months.

Mr Williamson said the labour force report could have been "potentially a lot worse".

"It's a fairly encouraging result to see that the unemployment rate remains low given where we are in the slowdown compared to previous contractions in economic activity," Mr Williamson said.

Treasury forecasts published in the 2009/10 federal budget papers indicated the unemployment rate was expected to reach 8.25 per cent at the end of 2009/10 before peaking at 8.5 per cent in 2010/11.

The Australian dollar reacted positively to the data.

The local currency was trading at $US0.7803 just before the report was published at 1130 AEST, but rose to $US0.7818 shortly afterwards.

Recent private sector surveys of employment have been mixed.

The ANZ job advertisements series showed the number of vacancies in newspapers and on the internet fell 6.7 per cent in June.

But reports from the Australian Industry Group provided some encouragement that the labour market was holding up well.

The performance of manufacturing index (PMI) showed the rate of job losses eased for a second straight month, with firm in the food and beverages, as well as clothing and footwear industries actually adding workers.

The performance of services index (PSI) showed employment "grew strongly" in the business related sectors of finance and insurance, and communication services. Retailers also hired staff in June.

In announced job cuts in June, West Australian Newspapers Holdings Ltd said it had reduced its full-time staffing levels by nearly 9 per cent.

Also, the Tasmanian government last month called for voluntary redundancy after announcing in its state budget plans to cut 800 public service workers.

Commonwealth Bank senior economist Michael Workman said the labour market was expected to continue to weaken.

"We think that trend will continue over the next six months, with falls of about 15,000-20,000 jobs instead of large falls of 40,000-50,000 that some people predict."

Mr Workman said the 0.1 percentage point rise in the jobless rate to 5.8 per cent during June was due to a fall in the participation rate.

The participation rate - the number of people available to work - fell 0.2 percentage points to 65.3 per cent in June, the Australian Bureau of Statistics said.

"It fell back from these record mid-65s levels that it has been running," he said.

"What we think is more likely to happen is the participation rate moves a bit lower again over the next six months.

"That will reduce the increase in the unemployment rate."

Mr Workman forecasts the peak in the jobless rate to be around seven per cent, which is under Treasury's forecast peak of 8.5 per cent expected in late 2010.

"On the indicators we look at, we don't see this phenomenal deterioration that some people are expecting," he said.

The jobs data for June would also keep the RBA on the sidelines for now, also a further interest rate cut is expected.

"We think later this year is more likely than the next month or two," he said.

"We are looking at October or November for another rate cut."

The RBA left the cash rate at a 49-year low of three per cent following its monthly board meeting on Tuesday, July 7.

Royal Bank of Scotland chief economist Kieran Davies said he expected the deterioration in the domestic labour market to gather pace in the months ahead.

Mr Davies said forward looking indicators such as the ANZ job ads series were pointing to significant weakness in the months ahead.

"It normally leads employment anywhere between six and nine months so we're at a point where you should be getting those jobs cuts and higher unemployment," Mr Davies said.

"We think that on the basis of the jobs ads series, you're going to see the outright decline in employment and rise in unemployment.

"I think it could accelerate."

Mr Davies said so far most of the rise in unemployment was due to the slowdown in job creation.

National Australia Bank (NAB) senior markets economist Spiros Papadopoulos said leading indicators such as the ANZ job ads series and NAB's employment index pointed to job losses of around 30,000 to 40,000 per month.

"So the RBA would be happy with the recent performance of the labour market, where trend losses are just 5000 per month, even if some labour hoarding is going on at present," he said in a research note.

"Nevertheless with businesses continuing to wind back investment spending and the pace of GDP (gross domestic product) growth well below trend, the unemployment rate will continue to move higher over the coming year.

Mr Papadopoulos said the jobless rate was expected to reach 6.5 per cent by the end of 2009.

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