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Jobless rate surges -

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Jobless rate surges

The World Today - Thursday, 9 April , 2009 12:10:00

Reporter: Stephen Long

ELEANOR HALL: First to the latest on the unemployment rate which has hit its highest level in five
years with full-time employment collapsing.

Official estimates say unemployment has surged to 5.7 per cent, up a full half a percentage point
in the space of a month. The economy shed nearly 35,000 jobs last month.

Joining me in The World Today studio with more details is our economics correspondent Stephen Long.

So Stephen, take us through the main numbers in this official estimate.

STEPHEN LONG: Eleanor, it's a very, very sharp rise in unemployment in the space of a month. Forget
the statistical numbers. Look at the real numbers. We've got an extra 53,000 people in March cast
onto the dole queues, looking for work. And the unemployment rate now stands at, unemployment
numbers now stand at more than 650,000 Australians out of a job.

And pretty much we've got a big rise in people looking for full-time work and part-time work as the
resilience, seeming resilience of the labour market has just collapsed. And the decline in
full-time work is very, very stark. Nearly 40,000 full-time jobs lost in the month.

There was a small rise in part-time employment - 4200 jobs - but that barely went anywhere towards
offsetting that.

ELEANOR HALL: Well this is a very steep jump in the jobless rate in just one month. What would this
mean if we were to continue like this until the end of the year?

STEPHEN LONG: Well if it continued at this rate until the end of the year we'd have double digit
employment by Christmas.

ELEANOR HALL: Unemployment?

STEPHEN LONG: Sorry, yes, a double digit unemployment rate by Christmas.

ELEANOR HALL: Which no-one really has predicted officially have they?

STEPHEN LONG: No, but we do have predictions of double digit unemployment from some economists next
year and if it were to continue like this it would be stark, but that would be a very, very
high-end estimate.

I think the way to read what's happening with this big jump is if the statistics are right, if
they're accurate and we can't read anything definitive into one month's figures, it would suggest
really that we've moved beyond the phoney war period where some economists were deluding themselves
into thinking that the Australian labour market was really strong and would just not be hit because
up until now, we'd actually seen employment in Australia continuing to grow.

This is the first month where employment has gone backwards and we now have two months with a
really, really big collapse in full-time jobs growth. And what that suggests to me is that
employers who were trying to keep skilled labour have now put up the white flag and said things are
too tough; we've got to let people go.

That is certainly the view of a number of economists, including Stephen Walters the chief economist
at JP Morgan.

STEPHEN WALTERS : Well I think it shows clearly that we're in recession. I think the debate about
whether we're in recession or not is not material.

It's very clear that output is contracting and what we've seen firms doing is firstly cutting
contractors and their temporary staff. They've moved through the phase now of cutting hours worked
and finally we've reached the point where firms are reluctantly cutting staff as well.

So I think very clearly firms are in retrenchment mode. They're cutting people now as well as
hours. They're cutting their capital spending programs and that all is all clearly symptoms of the
economy being in recession.

ELEANOR HALL: That's JP Morgan chief economist Stephen Walters.

So Stephen is the rise in joblessness concentrated in any particular states?

STEPHEN LONG: Well it's worst in New South Wales as it has been for some time and the unemployment
rate in New South Wales is now just shy of seven per cent Eleanor.

But what's really, really interesting is just how rapidly the jobless rate is rising in the
one-time boom state of Western Australia. It's now just shy of five per cent - 4.9 per cent
unemployment in WA - and that's up nearly two percentage points in the space of just three months.

So as the mining boom has collapsed it seems, jobs growth in WA has gone the same way. So we no
longer have a tale of two economies. We've basically got a convergence on a bad news situation with
unemployment around the country.

ELEANOR HALL: Now we saw the Reserve Bank cut rates this week by a quarter of a percentage point.
Does this rise in the jobless rate mean that more cuts and perhaps steeper cuts will be coming?

STEPHEN LONG: Well the Reserve Bank was clearly expecting unemployment to go up. So I don't know
how much the staff will be swayed by this but my suspicion is that as this jobless rate rises,
you're going to see basically a vicious cycle where this actually starts to hit the real economy
harder and takes us deeper into recession.

And the expectation of most economists and the financial markets will be that the Reserve will have
to cut and cut hard. And we know that the banks only passed on less than half, most of the big four
banks, and one of them none at all of that rate cut which certainly dampens its effect.

A lot of economists are now saying that the cash rate will fall as low as two per cent in
Australia. It's at three per cent now. And it's also quite likely that the Reserve Bank will be in
a position where it's a little bit shocked by the fact that so little of this was passed on by the
banks and it might have to revise its strategy.

ELEANOR HALL: What could it do? Just cut deeper or potentially not cut at all?

STEPHEN LONG: Well, well the situation is I don't think that the staff actually wanted to cut. They
wanted to wait and see. Unemployment is a lagging indicator. But if we keep seeing steep rises in
the jobless rate feeding into the real economy they'll have no choice but to cut...

ELEANOR HALL: Stephen...

STEPHEN LONG: And perhaps by big, big hacks rather than incremental measures.

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