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Reserve Bank of Australia - Source: ONE News
The Reserve Bank of Australia (RBA) looks set to raise the cash rate for an unprecedented third month in a row in December after last month's jobs growth again surpassed expectations.
The number of people employed in October rose by 24,500 when economists had expected a 10,000 decline, particularly in light of the surprisingly strong 40,000-plus increase in September.
However, this did not prevent the jobless rate ticking back up to 5.8% after the shock fall to 5.7% the previous month.
The unemployment rate has now been locked in a 5.7 to 5.8% range since May, leading some economists to believe a peak is not far away.
Not so, says the federal government.
Unsurprisingly, Deputy Prime Minister Julia Gillard is sticking with the government's 6.75% jobless peak forecast by June next year, particularly as this prediction was made only just last week in the release of the mid-year budget review.
"We expect unemployment to continue to rise," Gillard, who is also the employment minister, told reporters in Brisbane.
"That shows the impact on our economy of the global recession.
She said a further 11,100 were out of work in October, bringing the total number of unemployed Australians to 670,100.
"It also shows why it continues to be very important to keep delivering our planned economic stimulus," she said.
Still, economists doubt that this relatively modest rise in the unemployment rate will stop the central bank raising rates again.
"The apparent conclusion to the job-shedding phase is just one more reason to push on with rate hikes," NAB Capital chief economist Rob Henderson said.
The money market is now placing over an 80% chance of the RBA raising the cash rate by another 25 basis points to 3.75% at its December 1 board meeting, following on from its quarter-point moves in both October and November.
"Two straight months of strong employment rises raise the possibility that the labour market may be on the cusp of a turnaround, with the unemployment rate potentially at or close to a peak that is significantly below expectations," RBS Australia senior economic Felicity Emmett said.
She said that while there is still a good chance that the jobless rate will head a bit higher over coming months due to surging population growth, forward indicators of labour demand suggest that a turning point is near.
October's employment rise was largely made up of a 21,500 increase in part-time workers, resuming a trend of employers preferring to reduce their staff's hours rather than showing them the door.
Hours worked fell by a further 0.1% in October, to be down 1.3% over the year.
"With uncertainty surrounding the economic outlook starting to abate, workers hours probably will increase in 2010, as employers become increasingly confident that the recovery under way will be sustained," JP Morgan economist Helen Kevans said.
The small overall jobless rate rise was largely the result of the NSW rate jumping to 6.1% from 5.5%.
Apart from the ACT, which saw a modest increase, jobless rates in other states and territories either fell or remained unchanged.
