Unemployment rate remains steady but is set to weaken

Australia’s unemployment rate remained steady at 5.4% in January, despite predictions it would rise, but NAB has warned the labour market will weaken as business conditions deteriorate.

According to the Australian Bureau of Statistics, the number of people employed increased by 10,400 to 11,549,100 in January.

The increase in employment was driven by increased part-time employment, up 20,200 people to 3,450,700, and was offset by decreased full-time employment, down 9,800 to 8,098,400 people.

The increase in total employment was mainly driven by an increase in female part-time employment, the ABS said.

The number of people unemployed increased by 2,000 people to 659,600 in January.

Meanwhile, the monthly seasonally-adjusted aggregate hours worked series showed a decrease in January, down 3.9 million hours to 1,619.7 million hours.

The ABS also reported a seasonally adjusted labour participation rate decrease of 0.1% to 65% in January.

The figures will come as a surprise to some. Economists surveyed by AAP were tipping the unemployment rate to rise to 5.5%, while total employment was expected to grow by 5,000.

The news comes on the back of NAB’s Quarterly Business Survey, which shows business conditions in the December quarter fell to their lowest level since the June quarter of 2009.

The business conditions index fell seven points to -6 points, putting it well below the series’ long-run average of one point.

“The slump in activity reflected particularly sharp declines in trading conditions and profitability, while employment conditions also weakened in the quarter,” the survey said.

“The deterioration in business conditions was broad-based across all industries, with a very sharp decline recorded in mining – consistent with lower commodity prices and the deferral of some marginal mining projects – followed by construction, manufacturing, and transport and utilities.”

Encouragingly, NAB said business conditions appear to have held up “a little better” in consumer-dependent sectors such as recreation and personal services, retail and wholesale.

“[This suggests] lower borrowing rates may be providing some support,” the survey said.

Business confidence also edged lower in the quarter and remains “lacklustre” overall. In light of the results, NAB is forecasting further rate cuts.

“While the RBA left policy unchanged in February, we still think it is close to cutting (tentatively March) – albeit this will be data dependent,” it said.

“Beyond that, we still see two more rate cuts in the year as the labour market weakens.”