Economic News
40,000 Australians lose their jobs as business cuts costs: will we expect more in 2012?
December 14, 2011 by Editor · Leave a Comment
Australia’s jobs market is weakening as businesses look to cut costs to cope with a worsening global economy, economists say.
Data released by the Australian Bureau of Statistics showed Australia’s unemployment rate rose to 5.3 per cent in November from 5.2 per cent in October.
Total employment fell 6300 to 11.457 million in the month, while the participation rate dropped 0.1 of a per cent to 65.5 per per cent.
The data was significantly weaker than market forecasts of a rise in employment of 10,000 jobs in the month.
AMP Chief economist Dr Shane Oliver said the figures showed the jobs market was softening.
“Until recently it was the one strong patch of the economy outside mining but quite clearly the jobs market is giving way as well,” he said.
Dr Oliver said businesses were shedding jobs to cope with a weaker than expected economy.
“The economy outside mining has been quite week so companies have had to start laying people off to get their costs under control.”
He said the figures meant it was likely the Reserve Bank of Australia would cut interest rates by up to 50 basis points early next year.
“The reality is we’ll probably see more weakness going forward which I think will justify more rate cuts next year.”
The sharemarket slid and the Australian dollar fell by 0.43 of a US cent on the news.
At 12.08pm AEDT the benchmark S&P/ASX200 index was down 12.8 points, or 0.3 per cent, at 4279.7.
“As soon as (unemployment figures) came in we saw a drop off of eight points,” Bell Direct equities analyst Julia Lee said.
“Since then we’ve recouped some of that fall which just shows how the market is shrugging off any domestic news and keeping the focus on Europe.”
Macquarie Group senior economist Brian Redican said the employment figures were soft.
“That sort of combination of weaker overall numbers, the weakness concentrated in full-time jobs, and the rising unemployment is a fairly soft outcome overall,” he said.
“I suppose it highlight the reasons for the Reserve Bank to ease interest rates at the moment, despite strong growth in some sectors of the Australian economy it’s not translating through into stronger employment.
“That suggest for 2012 there will be weaker consumer spending, greater downside risk for businesses and this is of course even before the full impact of the European debt crisis.”
Mr Redican doesn’t expect a bounce back in employment in the new year.
“We expect firms will be reluctant to increase their hiring, until they have evidence that demand is picking up and I don’t think that will turn around in the next few months.”
Mr Redican said he believed the board of the RBA would cut the cash rate again at its next scheduled meeting in February, taking it to four per cent.
“These kind of (jobs) numbers, the possibility of a very low inflation rate in the fourth quarter would certainly all be consistent with the Reserve Bank trimming rates once again.”
Source: News.com.au
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