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Jobless rate rises unexpectedly -

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Jobless rate rises unexpectedly
Peter Ryan reported this story on Thursday, October 11, 2012 12:22:00

ASHLEY HALL: There's been a surprise increase in Australia's jobless rate as the slowdown in the economy begins to take hold.

The unemployment rate has risen to 5.4 per cent despite an improvement in the number of new jobs created.

The result has increased speculation that the Reserve Bank will cut interest rates again when the board meets next month on Melbourne Cup Day.

With the details I'm joined in the studio by our business editor Peter Ryan, and Peter, how should be view these figures given the higher jobless rate but better jobs creation?

PETER RYAN: Well, Ashley it depends how you look at all of this. On the one hand it could be seen as a very good result with 14,500 new jobs, that's against projections earlier for just around 5,000.

Full-time jobs also rose by 32,000, much more than expected, but almost 18,000 part-time jobs disappeared last month. So this is being seen as a vote of confidence in the resilience of the economy on one hand despite what is a pretty pessimistic global backdrop.

But how does that explain a jump in the jobless rate to 5.4 per cent? Put simply, there might be more jobs created out there but the number of people registered and looking for jobs is up by more than 30,000 to 662,000. So the supply of jobs is just not meeting the demand.

ASHLEY HALL: So that jump to 5.4 per cent of people out of work is quite big, how can we explain that?

PETER RYAN: Well, over the past couple of years, the participation rate had fallen by about 1 per cent to 65 per cent - that's people who have either given up looking for work or weren't on the books at all at Centrelink.

Now that participation rate is back up to 65.2 per cent - so people are actually out there and looking for work. Also we've seen that youth unemployment is now at a two year high and the participation rate has fallen with that as well.

Craig Michael, a senior economist at the ANZ Bank, says the previously low jobless rate we saw in September of 5.1 per cent may well have been masking the reality of unemployment in Australia.

CRAIG MICHAEL: A large part of the reason the unemployment rate rose was because people are now starting to re-enter the workforce. Probably what is more surprising is that how fast the unemployment rate actually fell the previous month. So potentially we are just seeing some noise around the data at the moment but it is consistent with a labour force that is weakening and we certainly are of the view that it is weaker than the unemployment rate has been suggesting for some time.

ASHLEY HALL: That's the ANZ's senior economist Craig Michael, and Peter how closely will the Reserve Bank be watching this result?

PETER RYAN: Well Ashley, the Reserve Bank meets on the first Tuesday of November, that's Melbourne Cup Day, and expectations are that the cash rate will be cut by another quarter of a percentage point to 3 per cent. That would be the lowest point since March 2009 in the wake of the Lehman Brothers collapse and we know that of all factors at the moment, the Reserve Bank is most concerned about the jobless rate blowing out in the slowing economy.

The Australian dollar additionally rose on the jobless figures from the ABS as high as 102.67 US cents because of the unexpectedly high number of new jobs but now that the reality is sinking in, it's back lower at 102.5 US cents.

ASHLEY HALL: So just in the context of the economy, there are some figures out today showing that Australians are now on average the wealthiest people in the world. How's that?

PETER RYAN: Well, not many people might actually be feeling that way, but this is a report from the investment bank Credit Suisse, it's global wealth report saying that Australia has beaten Japan, Italy, Belgium and Britain in term of median wealth - the average nest egg being around about $200,000.

The Asia Pacific region is now the world's biggest wealth-holding region but that's only because of massive losses in Europe because of the sovereign debt crisis.

Almost $12 trillion lost through the sovereign debt crisis, so all that wealth has evaporated, but Australians are wealthier on average partly because of lower credit card debt, student loans, compulsory employer superannuation and also because of high real estate prices in big cities and as we reported, that wealth could be eroded if that jobless rate we were talking about earlier moves much higher.

ASHLEY HALL: Thank you very much, business editor Peter Ryan.