Unemployment on the rise despite more positive signs, Rudd
By Colin Brinsden, Economics Correspondent09 Jun 2009 5:30 PM
CANBERRA, June 9 AAP - A more modest fall in job advertising and a jump in business confidence won't prevent the jobless rate climbing, Prime Minister Kevin Rudd has warned.
Economists expect the unemployment rate to surge when official labour force data for May is released on Thursday after a surprising fall in the previous month.
The May federal budget predicted the jobless rate racing to 8.25 per cent by the middle of next year compared to 5.4 per cent as of April.
A key indicator to future employment growth released on Tuesday - the ANZ's monthly job advertisement series - showed growth in ads falling by a tiny 0.2 per cent in May.
"One swallow does not a summer make ... we're not out of the woods yet and I expect unemployment still to rise," Mr Rudd told Sky News.
The May fall in ads marked the 13th monthly decline on the trot, to be down 50 per cent on a year earlier.
ANZ head of Australian economics Warren Hogan said the data was consistent with outright declines in the level of employment over the second half of 2009.
"We expect these falls in employment to start coming through in the official statistics at anytime," Mr Hogan said.
National Australia Bank also released its monthly business survey on Tuesday, showing a 12 point jump in its confidence index in May to its highest level since February 2008.
"That is a strong indication that we have made some progress in our strategy of nation building for recovery and that the government's overall investment in the economy is having an effect," Mr Rudd said.
NAB chief economist Alan Oster agreed further stimulus from the budget, particularly spending directed at infrastructure, had helped lift business confidence.
But he also said it reflected a rise in global share markets, higher commodities prices and stabilising credit markets.
"These stronger market trends are in line with the incoming economic data which suggest that the global economy could be about to stabilise after the steepest decline in activity seen in the post-war period," Mr Oster said.
He said businesses had also got overly pessimistic, fearing "armageddon", but now appear to be erring on the positive side.
"Confidence can be a leading indicator, but it also can be misleading in the sense that what really matters is, if you get a change in confidence, then that (must be) sustained." Mr Oster said.
Actual business conditions fell in May.
Economists' forecasts centre on the May jobless rate rising to 5.7 per cent in Thursday's data and back to a level seen in March prior to the quirky fall to 5.4 per cent in April.
JP Morgan economist Helen Kevans said that after reporting "an extraordinary and scarcely believable" rise of 27,300 in April, the official May data was expected to show 45,000 job losses which would push the unemployment rate to 5.8 per cent.
She expects the jobless rate to reach nine per cent in 2010.
"We believe the unemployment rate will be inflated by an elevated level of labour force participation," Ms Kevans said.
"One of the main reasons is that older workers probably will stay in the workforce longer than originally planned in order to compensate for the fact their retirement funds have dwindled over the past year."
