Jobs creation pushes back rate cut timetable

16 February 2012 | 14:14 - By Ricardo Goncalves

Today's unexpected fall in the unemployment rate has seen many economists push back their expectations for the next official interest rate cut.

 

46,300 jobs were created in January, which saw the jobless rate fall from 5.2 per cent, to 5.1 per cent.

The numbers go against what seems to be widespread job losses, as manufacturing plants shut down in Victoria and the big banks cull employees.

Today, Qantas said that it would offering redundancies to 500 staff as part of a restructure of its business.

CommSec economist, Savanth Sebastian said that, "The rate cuts late last year will help to support activity in the coming months and provide businesses with a bit more breathing space."

He does, however, concede that trading conditions are difficult and profitability is being affected.

Many economists aren't expecting the jobs market to hold out.

The Westpac/Melbourne Institute Index showed that unemployment expectations in February rose by 6.2 per cent.

Bill Evans, Chief Economist at Westpac said, "The index also showed a further deterioration in job confidence despite a 4.2% increase in consumer sentiment overall."

He's still expecting another two interest rate cuts from the Reserve Bank. "Our best estimate is that the next move, given the clear resolve of the Reserve Bank at this stage, is for the next cut to be in May with a follow up move in June/July."

Savanth Sebastian agrees. "Any escalation of the Euro Zone debt crisis is likely to prompt the Reserve Bank to move sooner rather than later when it comes to rates. In our judgement, and assuming Europe still muddles through in the next few weeks, the next interest rate cut won't occur until May, after the next round of inflation data."

It's a sentiment shared by NAB economist, Rob Henderson. "Confirmation that unemployment remains at historical lows and the apparent gradual tightening in labour market conditions suggest that there is little chance of a rate cut from the RBA in March, barring a financial melt-down in Europe."

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Comments (1)

26 Feb 2012 15:08 AEST

silvertongue

From: oz

Job Creation

Lets be actual Adults when it comes to job creation. My understanding it that 30 hours per week is regarded as Full time work but only if the info is taken during the time it is surveyed. If someone is on the dole and does free work for say Cancer Council, the Gov claims that is "paid' work and so off unemployed lists. If you are doing a partime course during the survey period, you are, once again, off the unemployed list. I'll bet unemployment is actually closer to 10 pct! What a coverup

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About this Blog

SBS Presenter Ricardo Goncalves with the latest in finance. Follow @BUSINESSricardo

Ricardo Goncalves Ricardo Goncalves is a Presenter / Reporter for SBS World News Australia

 
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