Unemployment in shock fall to 5.8%

The unemployment rate rate has fallen to a surprise 5.8 per cent from a decade-high last month, with 18,100 jobs added to the economy in a further sign that the sluggish labour market could be turning the corner.

Full-time positions fell by 22,100 but part-time jobs rose by 40,200, the Bureau of Statistics said in figures published on Thursday.

The participation rate fell to 64.7 per cent and the aggregate monthly hours worked increased eight million hours to 1617.2 million hours.

The unemployment rate since 1978, seasonally adjusted.

"I think the turnaround in hiring is consistent with the improvement we've seen in the business surveys and the jobs ads [data]," Barclays' chief economist for Australia Kieran Davies said.

"Companies were reluctant to take on people last year but they are feeling more positive about hiring this year."

Economists had expected the jobless rate at the revised February figure of 6.1 per cent - the highest since July 2003.

The Australian dollar surged on the news, jumping over half a cent to be fetching 94.40 US cents at 11.35am.

State-by-state breakdown

NSW's jobless rate fell to a seasonally adjusted 5.3 per cent from 5.7 per cent in February, while Victoria's unemployment rate remained stable at 6.4 per cent.

Mining powerhouse Western Australia registered the biggest fall in March from 5.9 per cent to 4.9 per cent. Queensland also saw its jobless rate ease to 6.1 per cent from 6.2 per cent.

But South Australia's unemployment rate rose from 6.7 per cent to 7.1 per cent, while Tasmania continued to record the highest rate in the country at 7.5 per cent, up 0.2 percentage points from February.

In trend terms, the Northern Territory and ACT's jobless rate fell by 0.1 percentage points to 3.8 per cent and 3.4 per cent respectively.

ANZ's head of Australian economics, Justin Fabo, said a key uncertainty for the jobs outlook would be how many positions could be lost as the mining investment boom fades.

"The improvement in a range of forward-looking labour demand indicators suggests that employment growth will remain solid in coming months," Mr Fabo said.

"The key uncertainty is by how much the strengthening in jobs growth will be held back by job shedding as mining projects wind up."

Chance of an earlier rate rise?

The Reserve Bank of Australia would be watching the next two months of data "to be convinced that a new trend is established", TD Securities head of Asia-Pacific research Annette Beacher said, adding that "consecutive upbeat Australian employment reports supports [an] RBA hike by year-end".

Mr Davies said the jobless rate could rise further, but peak in the middle of the year instead of in early 2015, as the RBA had been expecting.

The earlier turnaround could also mean that the central bank might raise interest rates then the expected first-quarter of next year, he added.

But the further jump in the level of the Australian dollar on the back of the jobs data would also see the central bank limit any hawkish rhetoric about monetary policy and inflation as it could put further upward pressure on the local currency, UBS economist George Tharenou said.

The latest figures came after February's surprise 80,500 jump in full-time positions, which boosted hope that a turnaround in the labour market could be in progress.

Recent forward job indicators have pointed to improving conditions in the labour market. On Monday, March job advertisement figures from ANZ showed an increase for the third-straight month, amid signs the demand for labour is strengthening.

Job ads for March lifted by 1.4 per cent, after a 4.7 per cent increase in February, the monthly ANZ survey showed.

Last week, Bureau of Statistics data found job vacancies rose by 2.6 per cent in the three months to February, as available positions in public and private sectors lifted after weakening in the previous quarter.

But while economists said a peak in the jobless rate could be close, it would not rapidly fall either amid the strong growth in population.

The Reserve Bank of Australia noted in its March board meeting statement last week that the jobless rate "will probably rise a little further in the near-term".


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