Job figures put rates cut back on agenda

FULL-TIME employment shrank and the unemployment rate rose last month, reinforcing economists' expectation of a further rate cut.

Labour market and unemployment figures

FULL-TIME employment shrank and the unemployment rate rose last month, reinforcing economists' expectation of a further interest rate cut next month.

After months of being surprised by the Australian Bureau of Statistics' keenly watched monthly jobs survey, the economists' forecast finally came true yesterday: the unemployment rate rose 0.1 percentage points to 5.2 per cent last month, although the 27,000 fall in employment to 11.5 million over the month, dulled by a small rise in part-time work, was worse than they expected.

"The very disappointing June jobs outcome reversed the surprisingly robust May employment performance," said Commonwealth Bank senior economist John Peters, referring to the unexpected surge in jobs in May.

"This (result) keeps alive our expectation of another rate cut in August," said UBS investment bank's chief economist Scott Haslem.

His was a widespread view that had been undermined by Reserve Bank governor Glenn Stevens's relatively optimistic statement accompanying the decision to keep interest rates on hold earlier this month.

The number of hours worked dropped 1.2 per cent in June and the participation rate fell 0.2 percentage points to 65.2 per cent, the equal lowest level this year.

"The RBA's 125 basis points of rate cuts since November last year have done more to shore up households' comfort than to remove the clouds of uncertainty hanging over the corporate sector," said JPMorgan economist Ben Jarman, referring to survey data this week that showed consumer confidence enjoyed a fillip in July.

Western Australia, the only state with an unemployment rate below 4 per cent, was alone in experiencing jobs growth in June. "Australia has seemingly gone back to 'two-speed' again," Mr Haslem said, after the unexpectedly strong jobs growth in NSW and Victoria in May.

Workplace Relations Minister Bill Shorten said Australia's job market remained one of the healthiest in the world, but he said the government was "acutely aware our patchwork economy continues to put some Australian businesses and families under pressure".

Opposition Treasury spokesman Joe Hockey said the fall in jobs stemmed from the carbon tax and from a "complete lack of confidence in the government's ability to rekindle the mainstream economy" among businesses.