Unemployment Rate in Australia Rises Again, RBA Interest Rate Cuts Looming
Labour force figures today are expected to push the unemployment rate higher than last month's 5.5 per cent as the decline of the Australian dollar and sluggish economy hampers jobs growth.
The unemployment rate in June is expected to increase to 5.6 per cent. Economists predict that the trend for job creation will remain flat since there were only 1,000 jobs added to the labour force last May. A total of 10,400 new jobs were added in June.
Martin Whetton, an economist at Nomura, says while the unemployment rate remains relatively low, job seekers or those who already have jobs don't have that many job offers to choose from.
The number of working hours has gone down while the wage rate remains over 3 per cent. However, a lot of the wage growth comes from part-time work which tends to be less secure than full-time jobs.
According to Whetton, most new jobs being offered are for part-time positions only. Most people get their source of income from part-time jobs which limit their ability to go out and spend money.
This is part of the reason why people are holding on to their money and retailers experience difficult conditions since consumer spending is down. Whetton says the unemployment rate could climb higher by the end of the year, maybe hitting 5.7 or 5.8 per cent.
ANZ economist Justin Fabo said, the upward trend in unemployment is already expected by economists and the Reserve Bank. It will be no surprise to anyone if the Reserve Bank will push through with plans of more rate cuts in August.
Chief economist for Commonwealth Bank, Michael Blythe, says the increase in unemployment rate would most certainly mean the Reserve Bank of Australia would be more than likely to cut interest rates. The current rate is a record low of 2.75 per cent.
Blythe said economists would also watch out for the quarter inflation data which will be released later this July. The country needs at least 17,000 jobs a month to stop the rising unemployment rate and more full-time positions.
The unemployment rate rose to its highest since September 2009 which might push the Reserve Bank of Australia to cut interest rates in August.
The Australian dollar remained steady with the news of unemployment rate increase, trading at 92.24 U.S. cents.
