Low participation keeps jobless rate level

The unemployment rate has defied the gloomy expectations of economists by holding steady at 5.4 per cent in January.

An extra 10,400 jobs were added across the country during the month - twice what the market was expecting.

However full-time employment fell for the third consecutive month, the latest figures from the Australian Bureau of Statistics showed.

CommSec economist Savanth Sebastian said there still some concerning trends in the Australian employment market.

"Yes, it was encouraging that (total) employment grew but more forward looking indicators like job advertisements have suggested that further labour market gains may be more circumspect," he said.

"In fact internet and newspaper job advertisements have fallen for 11 consecutive months, suggesting job growth is likely to flat line in coming months."

Mr Sebastian said a 0.1 per cent fall in the participation rate - the proportion of the working age population either employed or looking for work and ready to start - to 65.0 in January was not a big concern.

"Previous reports that we have published on participation rates and demographics have highlighted that a lot more of the younger workforce are opting for higher education given the sluggish labour market," he said.

"And as activity levels pick up and employers are keener to hire, the participation rate is likely to also to rise."

Mr Savanth said future employment data would be carefully watched by the Reserve Bank of Australia in the coming months, but the chance of a March rate cut has receded after the release of the latest jobs figures.

The central bank kept the cash rate at three per cent at its February board meeting this week.

Macquarie senior economist Brian Redican said the jobs figures showed employment growth remained sluggish over the past few months and another interest rate cut could be on the way soon.

"The general sluggishness of these labour market data are consistent with a rate cut," Mr Redican said.

"Because unemployment is only rising slowly though, it hasn't given the RBA any urgency to cut the rate, so by itself there won't be the trigger.

"In an environment where the economy is losing a major driver from mining investment and the replacement drivers for growth are pretty thin on the ground, these data are consistent with the RBA continuing to trim rates."

However, HSBC Australia chief economist Paul Bloxham said figures showed the labour market was more resilient than many believed and vindicates the RBA's decision to keep its cash rate on hold.

"While picking turning points in the economy is hard, we continue to think that the soft patch may be behind us," he said.

"Very timely local indicators suggest that loose monetary policy is working. Housing prices rose solidly in January, auction clearance rates in Sydney and Melbourne rose strongly last weekend.

"We remain of the view that policy setting and global conditions are conducive for a pick up in local growth, so the steady jobs market is consistent with that view."

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    0.9290+0.0003+0.03%
    AUDUSD=X
    0.5534-0.0001-0.01%
    AUDGBP=X
    0.6720-0.0001-0.02%
    AUDEUR=X
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