SYDNEY (Reuters) - Australian full-time employment surged in June but the jobless rate stayed stuck at 5.2% for a third straight month as more people looked for work, a sign of spare capacity that argues for more policy stimulus.
Thursday’s figures from the Australian Bureau of Statistics (ABS) showed 500 new jobs were added last month as a slump in part-time work overshadowed the 21,100 jump in full-time employment.
The monthly employment series has gained even more importance recently as the Reserve Bank of Australia (RBA) is closely watching labor market trends, awaiting a much-needed pick-up in wage growth and inflation.
“This report reinforces the view that labor market conditions have eased,” said Callam Pickering, APAC economist for global job site Indeed.
The RBA has recently estimated that the jobless rate will need to fall to 4.5% to generate any wage pressures. To help achieve that level it chopped interest rates twice since June to a record low of 1% as the economy grapples with subdued home prices and miserly consumer spending.
Economists expect another cut later this year, probably by November while some are predicting policy at 0.5% in 2020 as the RBA steps up efforts to revive growth in Australia’s A$1.9 trillion economy which has slowed to decade lows.
Financial markets pared the chance of an August move by the RBA as Thursday’s report was “not dramatic enough” to prompt a cut next month, AMP chief economist Shane Oliver said.
Rates futures <0#YIB:> now imply a 12% chance of a 25-basis-point cut to 0.75% from 20% before the data. The Aussie dollar AUD=D3 rose 0.3% to hover near the day's high at $0.7031.
“We see a further slowdown in jobs growth over the next six months,” Oliver said, citing a slowing in jobs ads, vacancies and hiring plans.
“We remain of the view that (the RBA) will still have to cut rates further later this year ultimately taking the cash rate down to 0.5% early next year.”
Getting unemployment to 4.5% looks like a tough task as Thursday’s data showed it held at 5.2% in June. The jobless rate got as low as 4.9% in February but has since been nudging higher.
That upturn has come even as hiring remained solid. Overall annual employment growth of 2.4% handily outpaced the U.S. performance of 1.6%.
Yet a constant influx of skilled migrants means the labor force is also expanding rapidly. Australia’s annual population growth of 1.6% is among the highest in the developed world.
That explains why participation stayed at a record peak of 66.0% in June, meaning nearly two of every three people are currently engaged in the labor market.
“Putting the pieces together, another rate cut appears more likely than not,” Indeed’s Pickering said.
“November is the most likely month.”
Reporting by Swati Pandey; Editing by Shri Navaratnam