Employment growth beats forecasts

Strong growth in employment has dampened expectations of a rates cut and lifted the Aussie dollar.

A Centrelink office. Pic: AAP

Employment grew strongly in the Australian economy in March, dampening expectations of an interest-rate cut in coming months and lifting the Australian dollar.

The unemployment rate rose to 5.0 per cent in March from 4.9 per cent in February, as expected by economists.

The number of people employed rose by 25,700, compared with an expected 15,000 rise, the Australian Bureau of Statistics said.

The number of people in full-time work rose by 48,300, while those in part-time work fell by 22,600.

Workforce participation rose to 65.7 per cent from 65.6 per cent in February and a consensus expectation of 65.6 per cent.

The Australian dollar pushed toward $72c on the data.

The Reserve Bank of Australia is watching trends in the job market closely, amid expectations that a slowdown in the economy through 2018 will eventually push up unemployment.

RBA Governor Philip Lowe has spoken of a growing tension between what has been consistently strong employment growth over recent years against what has been a sharp slowdown in growth, led by softer consumer spending.

Against that backdrop, evidence of weakness in the job market would likely prime the RBA to cut its official cash rate, joining other central banks that have recently turned dovish amid signs of a slowdown in the world economy.

The official cash rate has been stuck at a record low of 1.5 per cent since August 2016.

There is an argument that the slowdown in the economy since mid-2018 has been the result of an unusual confluence of forces that are not permanent. Among these is caution among business ahead of a federal election in May, a tightening in lending standards for banks, and falling house prices, which are showing tentative signs of slowing.

Globally, China’s growth outlook has improved a little, while markets are encouraged by steps to resolve trade tensions with the US.

BIS Oxford Economics’ Sarah Hunter said the latest figures, which were in line with consensus expectations, highlighted a “fundamentally healthy” jobs market that would ease pressure on the RBA to cut the cash rate.

“The minutes from the board’s April meeting confirmed that they are squarely focused on the health of the labour market as the key measure of activity in the economy,” Ms Hunter said.

“The board also noted that they need to see inflation making steady progress towards the two to three per cent - the reading for core inflation in next week’s inflation data will be crucial in informing their view on this”.

Meanwhile, the seasonally-adjusted underemployment rate for March increased 0.1 points to 8.2 per cent, with 1.1 million people underemployed. The under-utilisation rate increased 0.2 points to 13.2 per cent, while the participation rate rose 0.1 points to a near-record high of 65.7 per cent.

Queensland reported the greatest increase in overall employment, up 10,400 people, followed by Victoria with a 10,000-person increase. New South Wales fell the furthest, down 2,600 people, followed by Tasmania, down 1,800 people.

Dow Jones Newswires, AAP