11/09/2008 - 10:03

WA posts lowest jobless rate in August

11/09/2008 - 10:03

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Western Australia has recorded the country's lowest jobless rate for August with the latest national figures surprising economist who say the overall fall lessens the chance of an October interest rate cut.

Western Australia has recorded the country's lowest jobless rate for August with the latest national figures surprising economist who say the overall fall lessens the chance of an October interest rate cut.

The national unemployment rate was a seasonally adjusted 4.1 per cent in August, down from an unrevised 4.3 per cent in July, figures from the Australian Bureau of Statistics show.

Economists had expected the jobless rate to rise to 4.4 per cent in August.

In WA, the jobless rate fell to 2.8 per cent from 3.1 per cent while New South Wales had the highest at 4.9 per cent.

In Melbourne it dropped to 4.3 per cent from 4.6 per cent, in Queensland it tumbled to 3.3 per cent from 3.7 per cent and in South Australia it declined to 4.4 per cent from 4.6 per cent.

ICAP senior economist Adam Carr said the dip in the unemployment rate meant the Reserve Bank of Australia (RBA) would be less inclined to cut interest rates in October, particularly if credit growth failed to show signs of moderation.

"It lifts the bar," he said.

"A 4.1 per cent unemployment rate is pretty low - it's not the direction the Reserve Bank wants to go.

"In terms of the RBA view, it does make it harder for them to cut in October but it (the labour force data) is a lagging indicator.

"We'd need to see that unwind in credit growth."

Total employment rose by 14,600 to 10,744,300 in August, seasonally adjusted, the ABS said.

Full-time employment grew by 7,500 to 7,729,700 and part-time employment was up 7,200 to 3,014,600.

The participation rate in August was 65.2 per cent, compared with 65.3 per cent in July.

Economists had expected total employment to rise by 5,000, a jobless rate of 4.4 per cent and a participation rate of 65.3 per cent.

RBA governor Glenn Stevens told a House of Representatives Economics Committee on Monday that he expected the jobless rate to rise by to around five per cent during the next 12 to 18 months as the economy slowed.

Mr Carr said recent data suggested employment growth was slowing, but today's labour force figures created some uncertainty..

"It's confusing to see this data," he said.

"We have to look at forward indicators for growth and see what employment will do from that."

RBC Capital Markets senior economist Su-Lin Ong said the jobs data showed the labour market was still healthy.

"While the labour force release has been affected by budget cuts, with the sample size reduced by about a quarter since July, it nevertheless confirms a reasonably healthy labour market reflecting the strength of the economy two to three quarters ago," she said.

But Ms Ong said forward-looking indicators suggested employment growth was slowing, which meant an October rate cut by the RBA was still possible.

"Indeed, the forward indicators of the labour market are more insightful and suggest a moderation in employment growth ahead and a sustained rise in the unemployment rate," she said.

"This outlook remains consistent with the RBA recently beginning an easing cycle and likely to deliver another cut as soon as October."

National Australia Bank senior markets economist Spiros Papadopoulos said the RBA would not be too concerned with this month's jobs report.

"Given that they are forecasting the weakness in domestic growth, domestic activity, to continue into the second half of this year, they would know that these figures are simply reflecting the growth that we've seen in the early part of this cycle," Mr Papadopoulos said.

"In the months ahead, we should see a deterioration in the unemployment rate as Glenn Stevens signalled on Monday."

Mr Papadopoulos said the jobs data were a lagging indicator.

"Given that we're seeing a slowdown in domestic activity, we would expect to see some deterioration in the job figures in the coming months that should push the unemployment rate a fair bit higher from where it is at the moment," he said.

"That figure of 15,000, in round terms, has come down from the 30,000-40,000 increases that we were were seeing late last year and early this year."

Also, he said the survey's reduced sample size would result in the data being "more likely to be volatile from month to month".

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