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Jobless rate hits 5-year high and worse to come - economists

By Ed Logue
09 Apr 2009 3:49 PM

SYDNEY, April 9 AAP - Australia has posted the largest monthly jump in unemployment in 18 years, as the global downturn hits the local economy.

The nation's jobless rate rose 0.5 percentage points in March to 5.7 per cent, a five-and-a-half year high, Australian Bureau of Statistics (ABS) data on Thursday showed.

It was the biggest monthly jump in the rate of unemployment since July 1991, when Australian economy was in recession.

Economists said the resilience of the local labour market has cracked, and will force the Reserve Bank of Australia (RBA) to lower interest rates again later this year.

Since the jobless rate touched a 33-year low of 3.9 per cent in February 2008, the number of Australians joining the unemployment queue has risen by 213,900 to 650,900, an increase of 49 per cent.

Deputy Prime Minister Julia Gillard said the flow on effect of the global recession meant that domestic unemployment would be higher than the government previously forecast.

The federal government had forecast the jobless rate to be 5.5 per cent by June this year and increase to seven per cent by mid-2010.

"As the Treasurer has said, the worsening global recession means that unemployment here will inevitably be higher than previously forecast," Ms Gillard said.

The forecasts will be updated in the May budget for 2009/10.

The ABS found 34,700 jobs were lost in March, driven by a contraction of 38,900 full-time positions.

HSBC chief economist of Australia and New Zealand, John Edwards, said the jobs market had synchronised with a slowing economy in March, reflecting the biggest monthly fall in total employment since March 2003.

"There was never any doubt that employment would weaken, though we had thought the decline would continue to be more gradual," Dr Edwards said.

"We expect the unemployment rate to increase towards at least 7.5 per cent in the first quarter of next year."

JPMorgan economist Helen Kevans said the rise in unemployment in March mirrored recent indicators showing job shedding by employers had accelerated.

"This rapid rise, we believe, is a sign of things to come," Ms Kevans said.

Ms Kevans said there was a higher chance the unemployment rate could exceed JPMorgan's forecast of nine per cent by the end of 2010.

"During Australia's last two recessions in the early 1980s and early 1990s, the jobless rate ventured into double-digit territory, and it's not inconceivable that the jobless rate may venture there again," she said.

nabCapital senior economist David de Garis said the jobs data increased the likelihood fhe RBA would follow this week's 25 basis points reduction in the cash interest rate when it board next meets on May 5.

The RBA lowered the official interest rate to three per cent, a 49-year low, on Tuesday.

"We continue to expect that the RBA cash rate will be two per cent by later this year, with the RBA responding as the unemployment rate climbs and Australia's economic conditions deteriorate," Mr de Garis said.

Ms Kevans said the central bank would certainly "pull the rate trigger" in the second half of 2009.

"The delivery of this policy support will coincide with rising unemployment - it will be difficult for RBA officials to sit on their hands as the unemployment rate soars," she said.

The ABS report showed unemployment in NSW surged one percentage point in March to 6.9 per cent, a 10-year high.

While Western Australia's jobless rate rose 0.8 percentage points to 4.9 per cent, it was below the national average along with Queensland, 4.8 per cent, and Tasmania, 4.3 per cent.