Jobless blow to push call for more rate cuts

A loss of 19,000 jobs has lifted the jobless rate to 5.3pc and is likely to amplify stimulus calls.

The unemployment rate ticked up to 5.3pc in October. Picture: AAP

The economy has suffered its biggest monthly jobs loss in more than three years, adding to pressure on a reluctant government to provide more stimulus and strengthening the case for the ­Reserve Bank to cut rates again.

Australian Bureau of Statistics data showed a shock loss of 19,000 jobs last month, and the unemployment rate ticking up from 5.2 to 5.3 per cent on a seasonally adjusted basis. Other than a loss of 1000 jobs in May last year, the most recent drop of this magnitude was in September 2016 when the economy shed 18,800 jobs.

Economists had expected the key jobless measure to hold at 5.2 per cent and for 15,000 jobs to be added, according to Bloomberg consensus forecasts. In September, the economy added a downwardly revised 12,500 jobs.

The unemployment rate could have been higher had the participation rate not fallen to 66 per cent, from 66.1 per cent.

Economists downplayed the significance of a single month’s poor figures in a volatile series, but said the ABS data reinforced the view the labour market was ­deteriorating following a long ­period of resilience.

“The problem in the economy is not so much about job losses, just that job creation has slowed,” Westpac economist Justin Smirk said. Mr Smirk expects unemployment to push to 5.6 per cent by the middle of next year.

 

The weakening labour market trend is particularly visible in NSW, where the sharp fall in residential construction activity has helped push the jobless rate from 3.8 per cent in January to 4.8 per cent last month, now equal to Victoria’s, which started the year at 4.5 per cent.

Three RBA rate cuts since June, tax relief and a solid bounce in house prices should alleviate the residential construction sector and help steady the NSW economy in the coming months, CBA senior economist Belinda Allen said.

Opposition Treasury spokesman Jim Chalmers said the labour force figures reinforced that “the Australian economy needs responsible, proportionate and measured stimulus”.

“In the past week alone, we’ve seen rising unemployment and slowing wages growth, but the Liberals don’t have a clue what to do about it,” he said.

Employment Minister Michaelia Cash said the weak figures came after an “extended period” of robust conditions in the labour market.

“The Morrison government’s strong budget position is facilitating a record infrastructure spend, which will help create tens of thousands of jobs across the country,” Senator Cash said.

The data figures deal a blow to Reserve Bank governor Philip Lowe’s hopes that the economy had “reached a gentle turning point”, and call into question the bank’s forecasts that unemployment would steady and eventually trend lower in 2021.

The RBA estimates the unemployment rate needs to fall to 4.5 per cent in order to spark a meaningful lift in wages.

The market-implied probability of a Reserve Bank cut by February lifted to 56 per cent from 44 per cent, on Bloomberg figures.

“We do not think the RBA will rush and cut the cash rate in ­December in reaction to one negative print,” Ms Allen said. “But it will sustain the easing bias.”

Ms Allen has predicted the central bank will cut to 0.5 per cent in February.

The ABS data also showed the national underemployment rate — an increasingly watched measure of spare capacity in the ­labour market against a background of tepid wage growth — climbed to 8.5 per cent from 8.3 per cent, on a seasonally adjusted basis. On a trend basis, which smooths out month-to-month volatility in the seasonally adjusted data, the unemployment rate was steady at 5.3 per cent last month, with an­ extra 12,300 jobs added.