Australia’s unemployment rate rose unexpectedly in July to its highest level since November last year, with economists warning it could rise further as market fears set in.
According to the Australian Bureau of Statistics, the unemployment rate rose to 5.1% in July, up from 4.9% in June, while the participation rate remained steady at 65.5%.
For the month, the economy shed 22,200 full-time staff but added almost as many part-timers (21,100), leaving total unemployment steady at 11.45 million.
Victoria posted the biggest jump in the jobless rate, jumping from 4.6% in June to 5.1% in July, while the tally remained unchanged in NSW at 5.2%.
The unemployment rate in flood-affected Queensland rose to 5.6% in July from 5.2% in June, while the rate fell in fellow resource state WA from 4.2% to 4%.
In South Australia, the jobless rate increased to 5.3% from 5.1%, while in Tasmania it went the other way, falling to 5.2% from 5.5%.
Earlier this week, NAB chief executive Cameron Clyne said the country’s low unemployment levels have been crucial to helping his bank generate record profits.
“The reality is if we start to see escalating global concerns and unemployment rise, then it’s a different ballgame,” Clyne said.
The high level of market turmoil could soon spill over into the domestic economy as companies looking at cutting payrolls and consumers defer spending.
The impact of the high Australian dollar over the past year has also been blamed for recent job losses.
The dollar dropped almost one US cent after the release of today’s unemployment figures, following a weak of fluctuations in light of the US’ credit downgrade.
Prior to the release of today’s data, investors had been tipping a 50-basis-point cut by the Reserve Bank at its next board meeting.
Only two weeks ago, some analysts had been tipping the RBA would soon have to lift rates to keep a lid on inflation, but concerns have now shifted to the turmoil on global financial markets.
The unemployment rate has been hovering around 5% or lower since December. Low unemployment – aided by strong demand for commodities from Asia and a limited labour pool – has helped Australia weather the global financial crisis to date.
However, it’s uncertain how long that will last. Yesterday, it was revealed the Westpac-Melbourne Institute Index of Consumer Sentiment fell 3.5% in August, indicating global conditions are already having an impact.
“This financial turmoil has added another dimension of risk to consumers over and above those issues associated with interest rates, house prices, carbon tax and, potentially, jobs,” Westpac senior economist Bill Evans warned.