Yesterday’s release of Australian unemployment is a disappointing setback to what has been a recent period of more positive Australian economic data.
Australia shed a net 27,000 jobs in June, versus expectations of flat growth. The unemployment rate also ticked up to 5.2% from 5.1% previously, a rate that would have been even higher if not for a fall in the participation rate. The losses all came in full time jobs, and was offset somewhat by a slight rise in part time employment.
While the employment data can be volatile from month to month, the loss in jobs is certainly consistent with the anecdotes and commentary coming out of corporate Australia for the last 6 months. Just in the last few days, we have seen the closure of a well-established chocolate retailer, the Darrell Lea Company, as well as the announcement of further job losses at department store chain Myer. While mining remains strong, a de-leveraging consumer, a high currency, increases in government imposed labour rates, declining productivity and carbon taxes means companies are likely to continue to trim their work forces to boost their bottom lines.
It had appeared the economy was beginning to gain some traction as the 75bps worth of interest rate cuts over May and June had translated into higher than expected retail sales, higher than expected building permits, and a tick up in the latest consumer confidence surveys. This latest unemployment number will play to the fears of many about their job security, and likely take away the benefits that the RBA rate cuts had started to accrue.