Australia's national unemployment rate has risen to its highest level in 10 months amid predictions the world's richest nations could again plunge into recession.
The Organisation for Economic Co-operation and Development last night sharply revised down its growth forecasts for the rest of the year for Group of Seven rich industrialised countries and expected at least one quarter of contraction in Germany and Italy.
The OECD also forecast the US economy would grow at only a 0.4 per cent annualised rate in the fourth quarter.
In its interim economic outlook assessment, the OECD said the eurozone crisis could deepen and warned that the risk of economic contraction had increased in some major OECD economies.
But it said ''a downturn of the magnitude of 2008-2009 is not foreseen''.
The OECD's update to its May forecasts came as Australia's national unemployment rate rose to its highest level in 10 months in August, when it hit a seasonally adjusted 5.3 per cent on the back of the fourth fall in full-time employment in five months.
The rise has fuelled predictions that interest rate cuts may be on the agenda.
The Australian dollar lost half a US cent to US105.83c on the news, which was worse than expected. It recovered to US106.6c at 5pm.
The Australian Bureau of Statistics' labour force figures also showed the ACT's unemployment rate was steady at 4 per cent in trend terms, and remained the lowest in the nation.
Westpac economist Justin Smirk said it had been a disappointing year for job creation. ''And that looks unlikely to change. Total employment has risen just 22,600 so far this year for a paltry average of 2800 per month,'' he said.
''Westpac's forecast for the unemployment rate to peak at 5.5 per cent by mid-2012 is starting to look conservative.''
CommSec economist Savanth Sebastian described it as a reality check for those who thought the economy was shooting the light out.
''[It] is also consistent with the anecdotal evidence we are hearing from businesses outside the mining sector. Conditions are tough and the lack of consumer spending and inherent weakness in the housing sector is filtering through to other parts of the economy,'' he said.
''The key question is what happens from here. While businesses are likely to pull back hiring plans due to the uncertain environment, it is still unlikely that significant job losses are around the corner.''
This meant the Reserve Bank was likely to keep interest rates steady.
HSBC chief economist Paul Bloxham said rates would remain on hold if there was a modest rise to unemployment, but ''if it picks up pace, the case will build for cuts''.
''There is now evidence that firms were getting ahead on their employment plans in 2010, in preparation for expected growth plans in 2011, and were perhaps a bit overzealous,'' he said.
''After chronic labour shortages just prior to the global financial crisis, many firms were probably overly keen to hire workers when they saw the next investment boom coming, and so we have seen some labour hoarding. This seems to be being unwound.''
TD Securities strategist Annette Beacher said another sharp rise in unemployment would be cause for concern. ''Is the lift to 5.3 per cent a one-off or start of a new trend higher and higher? While an unemployment rate of 5.3 per cent is still the envy of the Western world ... a sharper acceleration towards 6 per cent could provide ammunition for the RBA to [cut rates].''
The bureau said the ACT's unemployment rate was steady at 4 per cent in trend term despite a drop in the number of employed people from 204,000 to 203,900.
The ACT's participation rate - which measures the proportion of people actively looking for or in work - dropped from 72.6 per cent to 72.5 per cent, but remains the highest rate in the nation.
The bureau said the ACT had an underemployment rate - which measures the number of people who want to work longer hours - of 4.4 per cent.
with agencies
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