Unemployment hits 6 per cent
Unemployment is at its highest level in a decade and Treasurer Joe Hockey warns it's likely to get worse before it gets better.PT1M56S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-32k92 620 349 February 13, 2014
The jobless rate has shot up to 6 per cent, its highest level in more than a decade, as 3700 jobs were removed from the economy, official figures show.
There were 7100 full-time positions lost and 3400 part-time jobs added, the Bureau of Statistics data for January showed.
The participation rate, the percentage of people either in work or looking for work, remained stable at 64.5 per cent. December's participation rate was revised down to 64.5 per cent from 64.6 per cent.
Australia's unemployment rate has hit its worst level in 10 years. Photo: Belinda Pratten
News of the latest unemployment figures sent the Australian dollar tumbling back below US90c.
The aggregate monthly hours worked rose by 20.5 million hours to 1,635.8 million hours, which could indicate future improvements in the jobs market, economists said.
Weakening labour market
"There's no spinning it, Australia’s labour market is weak," Moody's Analytics associate economist Katrina Ell said.
"Businesses are not confident in future economic conditions so are trimming jobs and working their existing staff harder."
Analysts had expected the unemployment rate to edge up to 5.9 per cent, with 15,000 jobs added to the economy.
The further losses in full-time jobs for both men and women suggested broader weakness in the labour market beyond the mining and resources-related sectors, ANZ's head of Australian economics Justin Fabo said.
"The ongoing weakness in the labour force report has surprised us and it appears somewhat inconsistent with other indicators like job ads and the NAB measure of firms’ spare capacity," Mr Fabo said.
"We remain of the view that employment outcomes will gradually improve in coming months but certainly it is taking longer than we thought."
Federal Treasurer Joe Hockey blamed the former Labor government for the rising jobless rate, adding that while the figures were not unexpected, they "indicate the size of the challenge that we have before us".
"Australians instinctively want it to get better but they also want the promises delivered," Mr Hockey said.
"And those promises include repealing the carbon tax, repealing the mining tax, getting on with the job of fixing the budget."
Federal opposition leader Bill Shorten said it had been a "terrible week for Australian jobs".
"Our concern is there is more pain coming down the road as industry adjusts and our real fear is that the Abbott government doesn't have a plan to do anything with jobs."
Economists have cautioned that further tightening of government spending could hurt the economy's attempts to successfully shift away from mining-led growth.
Rise not unexpected
The unemployment rate, which edged up last year, is expected to rise further above 6 per cent in 2014 as the economy adjusts to lower investment from mining companies.
"I guess what we've got to remember is jobs growth is a lagging indicator of economic activity," St George's chief economist Besa Deda said.
"In recent months, we have seen more encouraging signs in the economy, but that will take some time to feed through to the jobs numbers. Leading indicators are showing some stabilisation, which is encouraging.
"[But] we can expect the unemployment rate to edge higher through the first-half of this year."
Other economic indicators, such as house prices, building approvals, retail sales and business conditions, have been strengthening over the past few months.
HSBC's chief economist Paul Bloxham said the weight of evidence from the other data suggested that domestic demand had been improving in the fourth-quarter of last year. Mr Bloxham expects the jobless rate to peak by the middle of this year and believes the RBA will not cut interest rates again in 2014.
"We ... know that the labour market tends to lag the economic cycle," Mr Bloxham said.
"Our estimates suggest that it typically takes two to four quarters before a lift in conditions feeds through to hiring."
The Reserve Bank has repeatedly noted in its statements that it has been expecting the jobless rate to push higher as the mining boom peaks and the economy turns to other sectors to drive growth.
In its Statement of Monetary Policy released on Friday, it said that "with growth of economic activity expected to remain below trend for a few more quarters at least, it is likely that employment growth will be only moderate over the coming year and the unemployment rate will continue to edge higher".
Consumer confidence falls
The latest labour market numbers came as a monthly survey by Westpac and the Melbourne Institute found consumer confidence slipped for the third straight month in February, as Australians fretted over the weak jobs outlook.
Westpac's unemployment expectations sub-index, which was part of the survey released on Wednesday, rose 2.3 per cent this month.
That meant the survey's respondents expect the jobless rate to rise more than it has been. The unemployment sub-index has been going up since September.
"Households are clearly nervous about jobs again. Recent press on Holden, SPC, Qantas and now Toyota would not have helped," Westpac senior economist Justin Smirk said.
At the same time, economists said the number of jobs needed to be created each month - about 25,000 - was not keep pace with the strong growth in population.