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New jobs grow but unemployment steady -

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ELEANOR HALL: Today's employment figures suggest that the Australian economy is not slowing as much
as expected, reducing the pressure on the Reserve Bank board to cut interest rates.

Labour force figures released today show a significant rise in the number of new jobs created last
month.

The economy added just under 11,000 new jobs in July, fuelling concerns about higher wage claims
and inflation.

Earlier this week, the Reserve Bank had pointed to the possibility of rate cuts over coming months,
but these numbers contradict most of the data which had pointed to a dramatic slowing in the
economy.

Richard Lindell has been looking at the figures and joins us now in The World Today studio.

So Richard, just how strong are these figures?

RICHARD LINDELL: Eleanor, economists were looking for a slight increase in employment of around
5000 jobs with the unemployment rate staying steady at 4.3 per cent.

They got the second part right, but 53,700 new full-time jobs were created, while 42,000 around
were lost, part-time jobs were lost. So these numbers on face value suggest the demand for labour
is still very, very strong but there are a couple of caveats.

Firstly - full-time jobs added would be part of a process that are months old and many of those
would be in the mining sector. Secondly - those jobs numbers are quite lumpy in that they jump
around a lot from month to month, and the sample size has also been reduced, so they may not be as
reliable as we might think.

But still, this is unexpected and it is a return to the very strong trend we saw last year.

ELEANOR HALL: So does this mean that the economy is not slowing as much as many of the other
economic indicators have suggested recently?

RICHARD LINDELL: Not necessarily. This is a lagging indicator - that is it tells us what happened
last month.

There are plenty of forward indicators pointing to an economy headed for a slowdown. We've got
consumer and business confidence at 17-year lows, levels not seen since the last recession. Housing
approvals have crashed, credit growth - that's what individuals and businesses borrow - has slowed
to a crawl. Activity in the manufacturing and services sector is also going backwards.

So all these indicators point to quite a dramatic slowdown in the economy, something much more
pronounced than the RBA was expecting or hoping for when it increased rates twice in February and
March this year.

And also on the jobs front, outside of these figures, there have been early signs that the labour
market is coming off with job ads in newspapers and online falling.

ELEANOR HALL: Yes Richard, you say these are lagging figures, do these numbers include the recent
high profile sackings at companies like Starbucks?

RICHARD LINDELL: They won't and in fact it's not just Starbucks; there's also been Don Smallgoods
earlier this year, Qantas and Mitsubishi. So those large-scale job losses will feed through to the
figures in months to come.

Add to that the anecdotal evidence of casual hours being cut, particularly in the services sector;
of contractors not getting as much work as they used to; and as a whole it paints a picture that
the jobs market is weakening, not withstanding these month's figures.

But once again, I would caution about reading too much into a set of numbers that are notoriously
lumpy and backwards looking.

ELEANOR HALL: So how much store will the RBA place in these figures?

RICHARD LINDELL: It is an important piece of data so the better than expected figure will make the
RBA think about its position.

The board will be concerned that the labour market isn't coming off like it should and this could
lead to wages inflation as demand for labour gives workers more power in the negotiations with
their bosses. On that front, we'll find out if wages inflation is becoming a problem when wage-cost
data is released next week.

But the board is still likely to put more weight on the forward indicators such as business and
consumer confidence and that huge body of evidence of a slowing economy that I mentioned earlier.

ELEANORE HALL: So your call - The RBA gave a strong indication earlier this week that it will cut
rates and soon - is that still on the cards?

RICHARD LINDELL: look I don't think that one month's figures will change the RBA's view that it
will need to cut rates in the months ahead. Certainly if these figures are repeated it will become
a factor.

But the futures markets are now betting on a half a per cent rate cut next month and around one per
cent over the next year or so. And history shows us that rates come down much faster than they go
up.

So as long as the employment figures are not repeated in September and October we could see a
series of cuts - firstly because the banks are unlikely to pass on the full value of any official
moves and secondly because the RBA needs to stimulate the economy to avoid a hard landing - that of
course is a recession.

ELEANOR HALL: Richard Lindell, thank you.