Australia’s unemployment rate rose to 5.4 per cent in September with more people looking for work as softness in the national economy began flowing through to the jobs market.
The larger-than-expected rise follows a reading of 5.1 per cent in August and marks the highest level of unemployment since March 2010 - a two and a half year high. Economists polled by Bloomberg expected the jobless rate to rise to 5.3 per cent amid a weaker outlook for domestic and international growth.
While the unemployment rate moved higher in September, the news is not all bad. The participation rate, or the share of the population working or available to work, also rose during the month, showing that despite the slowdown in the economy more people were looking for work. That is a rebound from last month when the participation dropped to 65 per cent, a level not seen since the start of 2007.
The Australian dollar climbed about half a US cent when the data was released to $US1.025 and has since risen to $US1.0258. Australian shares also responded favourably, jumping about nine points, or 0.2 per cent, but the gains were shortlived.
Softness now in view
RBC Capital Market senior economist Su-Lin Ong said the unemployment rate is "telling you that the labour marketing is clearly softening".
"We think the unemployment rate will hit 5.5 per cent by year's end," she said.
Ms Ong said the rise justified the RBA's October rate cut and would probably be the basis of further rate cuts to come.
Michael Blythe, chief economist at Commonwealth Bank, agreed that today’s data wouldn’t discourage the RBA from cutting rates again, possibly as soon as November.
"It's still a case of easing bias here. The Reserve Bank still expects unemployment to rise," he said.
"They obviously interpret the labour market now as soft as they've said. Given some of the global concerns that are still playing out the risks still point to lower rates. We think we'll see another move (down) in November."
State by state
Queensland bore the brunt of the job losses in the mining states, rising from 6 per cent in August to 6.3 per cent in September. Western Australia was steady at a national low of 4 per cent for the second month running.
In New South Wales, it rose to 5.2 per cent from 4.9 per cent in the same period. In Victoria, the jobless rate was steady at 5.6 per cent.
In South Australia, the unemployment fell to 5.6 per cent in September from 5.7 per cent in August. In Tasmania the jobless rate rose to 7.3 per cent from 6.8 per cent in the same period.
Paul Brennan, Citigroup’s head of economics and market analysis, said the figures were broadly consistent with expectations. He said that many believed last month’s data had understated the unemployment rate and today's result better reflected the true state of the national jobs market.
Nationally, full-time employment rose by 32,100 to 8.107 million in September and part-time employment was down 17,700 to 3.405 million. The September participation rate was 65.2 per cent, compared with 65.0 per cent in August. The September participation rate was forecast to be 65.1 per cent.
Aligning with expectations
JP Morgan economist Ben Jarman said the rise in the unemployment rate along with the rise in the participation rate brings the picture of the labour market closer to where analysts had long suspected it should be.
In previous months, analysts had tipped a higher jobless rate only to be surprised by a lower-than-expected unemployment rate, he said.
"The prior weakening in unemployment had been disguised but now its clear again because the rise in the participation rate," said Mr Jarman.
Underlying measures of the health of the jobs improved in September, with the seasonally adjusted total monthly hours worked rising 7.6 million hours to 1.62 billion hours.