Fears deepen of increase in unemployment figures

Temporary hiring last month linked to the federal election was not enough to lower the unemployment rate.

Just 2400 full-time jobs were created, while part-time work figures surged 39,800. Picture: Bloomberg

Temporary hiring linked to the election is suspected of driving a surprisingly strong lift in jobs last month, but it was not enough to lower the unemployment rate or weaken the case for another cut in official interest rates this year.

As policymakers consider further moves to increase economic growth from the slowest rate in a decade, there were warnings yesterday that the unemployment rate could move higher as more people join the hunt for jobs.

The unemployment rate was unchanged last month from April at 5.2 per cent; economists had ­expected it to fall to 5.1 per cent. ­Underemployment rose to 8.6 per cent from 8.5 per cent.

The number of people in work rose 42,300, compared with an ­expected 16,000 rise, the Australian Bureau of Statistics said. Combined with an upward revision of April’s numbers, the jobs growth is running at 2.9 per cent, its fastest pace in a year, according to Capital Economics.

Capital Economics economist Ben Udy said the figures sup­ported the Reserve Bank’s argument that there is spare capacity in the economy, even with the jobs numbers running at what are historically considered full employment. “That means that the unemployment rate would need to fall much further before inflationary pressures strengthen in earnest,” Mr Udy said.

 

Behind the headline figure, just 2400 full-time jobs were created, while part-time work figures surged 39,800.

Economists said the part-time figures might have been boosted by hiring ­related to last month’s federal election. The Australian Electoral Commission said about 80,000 people were put on for the election. But the impact of the surprisingly strong number was blunted by a rise in participation, which rose last month to 66 per cent from 65.9 per cent in April. That compared with consensus expectations of 65.8 per cent. UBS economist George Tharenou said the labour market was sending mixed signals: there is strong jobs growth but a slowdown in hours worked, unemployment is trending up and the under-utilisation rate is rising.

Economists said that without a step up in economic growth from the weak March quarter figures, unemployment was likely to rise further this year.

“The global backdrop has turned more negative recently — particularly around trade policy developments — such that it is harder to see Australia’s economy getting as much support from the world as it had in 2017 and early 2018,” Paul Bloxham, chief economist at HSBC Australia, said.

Business Council of Australia chief economist Adam Boyton said the jobs figures highlighted the need for strategies to boost economic growth. “Protecting Australians from a volatile global economy means we must act to increase investment and make Australia’s economy more innovative and productive,” he said.

The Aussie dollar dipped yesterday by US0.2c to US69.08c after the release of the jobs figures.

The Reserve Bank has put the labour market at the centre of ­policymaking, saying interest rates will be cut further if the jobless rate doesn’t fall.

Interest rates were lowered for the first time in nearly three years on June 4, taking the official cash rate to a record low 1.25 per cent.

additional reporting: Dow Jones Newswires