SYDNEY–Australia’s unemployment rate was higher than expected in May, stoking the case for a cut in interest rates in coming months as policy makers move to support an economy growing at its slowest pace in a decade.
The elevated jobless rate came despite a strong rise in employment as more people looked for work last month.
The unemployment rate was unchanged at 5.2% in May from April, although economists had expected an unemployment rate of 5.1%. Underemployment rose to 8.6% last month from 8.5% in April.
The number of people employed rose by 42,300, compared with an expected 16,000 rise, the Australian Bureau of Statistics said Thursday. The number of people in full-time work rose by 2,400 in May, while those in part-time work rose by 39,800.
Workforce participation rose to 66.0% in May from 65.9% in April. That compared to consensus expectations of 65.8%.
The RBA has put the labor market at the center of policymaking, saying interest rates will be cut further if the jobless rate doesn’t fall.
Interest rates were lowered for the first time in nearly three years on June 4, taking the official cash rate down to a record low 1.25% from 1.50%.
RBA Governor Philip Lowe has said it would be reasonable to expect further reductions in the cash rate, while also sending out a plea to the government to do more in the way of increased spending.
The central bank estimates that full employment, or the level of joblessness below which wages will rise, is now around 4.5%.
Financial markets have priced in further interest rate cuts over the remainder of the year, with some banks saying the RBA will need to go further and introduce unorthodox policy measures at some point.
The Commonwealth Bank of Australia’s head of global currency strategy, Richard Grace, said Thursday that while the introduction of quantitative easing by the RBA seems remote, the Australian dollar could fall by up to 5% if it’s deployed.
-Write to James Glynn at [email protected]
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