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Jobless rate jumps to four-year high -

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Jobless rate jumps to four-year high

The World Today - Thursday, 12 March , 2009 12:10:00

Reporter: Stephen Long

ELEANOR HALL: But first to the economy where there's been a sharp rise in joblessness as the global
recession hits home.

The unemployment rate has jumped to 5.2 per cent - the highest rate in four years; more than 47,000
people lost their jobs last month; and after a surprise rise in January, full-time jobs growth has
collapsed.

Joining me in the studio with more on the story is economics correspondent Stephen Long.

So Stephen, what does this tell about just how depressed the economy is?

STEPHEN LONG: Well it's further evidence Eleanor that the economy is in a bad state and probably in
recession, despite the fact that we haven't had two consecutive quarters. This suggests that we
will. And these numbers can be volatile month to month but the trend is clear.

If you look the unemployment rate has risen from 4.5 per cent to 5.2 per cent in the space of just
two months. If you go back to August it was 4.1 per cent. So the unemployment rate has jumped by
more than a percentage point in six months and 0.7 of a per cent in just two. That tells you that
pretty much at the end of last year we turned the corner on the economy and started heading down.

It's also likely to get significantly worse. The job ads this week were shocking - a record fall in
the number of job advertisements. And that's just that the unemployment rate will rise
significantly, as in fact Treasury is predicting. They're saying seven per cent next year. I'm
hearing some economists within the market say, in quiet tones, they haven't published this kind of
forecast yet, but 11 per cent.

ELEANOR HALL: Eleven per cent! And what do you make of this collapse in full-time employment? It's
a big turnaround from January isn't it, when full-time jobs rose?

STEPHEN LONG: I think really what this suggests is that the rise in full-time jobs in January was
essentially a mirage. Some market economists seized on that number to say that the labour force was
still resilient, employers were still hiring and it suggested Australia may stay out of recession.

But if you drill down into those January numbers, what they actually showed was that most of that
seeming rise in full-time employment in the month, it was actually women, mainly in the services
sector, in retail, who were moving from part-time jobs to full-time jobs during that month, the
January sales. They weren't sustainable jobs.

What we're seeing now is a trend over quite a considerable period of time to full-time jobs falling
and part-time employment rising, which is the classic pattern in the early stages of a recession.

ELEANOR HALL: So what does this say then about the effectiveness of the Government stimulus
packages?

STEPHEN LONG: Well clearly there was a boost to full-time jobs in January but the question is
whether those jobs were really sustainable.

Now I don't think you can read anything definitively from these numbers into the effectiveness or
otherwise of the stimulus package but the Prime Minister is certainly maintaining that it would
have been worse without the Government's efforts. Here's what he had to say this morning.

KEVIN RUDD: Any job loss in Australia is one too many as far as I'm concerned but had we waited and
done nothing instead of acting decisively, these unemployment figures would be much worse.

ELEANOR HALL: That's the Prime Minister Kevin Rudd responding to those very negative employment
numbers.

At the same time though Stephen, part-time job numbers are growing and the participation rate is
up. Doesn't that mean that the demand for labour is still holding up?

STEPHEN LONG: It's impossible to really gauge from these statistics why part-time employment is
rising. In the United States they, every month when they publish the labour force statistics they
have a category which gauges the number of workers who were part time for economic reasons; ie
they're part time because they can't get more hours of work. And that has been rising significantly
in the US.

Now it would be reasonable to suspect that the increase in part-time jobs is partly a product of
people who can't get full-time work who are now reduced to part-time employment, either as casuals
or contractors. And also it may suggest that employers are hedging their bets and taking on people
in casual and contingent jobs rather than offering full-time jobs because they're worried about
what's to come with the state of the economy.

Now the participation rate; again, it does look curious that the participation rate is increasing
but it could partly have to do with people being in economic straits and an extra person in the
household having to go out and find work if the work is drying up in the way that I just suggested.

So I don't think you can necessarily read that as a sign of resilience and strength in the labour
market. In fact it's almost certainly in these circumstances a sign of the opposite.

ELEANOR HALL: So what are the implications of these employment figures for interest rates?

STEPHEN LONG: Well I imagine that it would give the Reserve Bank of Australia serious pause for
thought about whether they should continue their pause in the interest rate cutting cycle.

Most market economists, and there are some instant views on the wires, are now saying that they
think it's very, very likely that the Reserve Bank will cut again after pausing this month when it
meets at its next meeting, possibly by 50 basis points, half a per cent or more.

ELEANOR HALL: Stephen Long, our economics correspondent, thank you.