Friday, 13 June 2008

NSW feels the deepest jobs cut

MORE than 17,000 NSW workers left or lost their jobs last month in the worst labour market reading in years, fuelling fears the state will suffer the brunt of the coming economic slowdown.

Across the country the number of people in work fell for the first time since 2006, a government report published yesterday showed. Most of the job losses were in NSW.

Economists say that employment remains strong, but more people will soon be out of work as businesses buckle under the weight of interest rates, fuel prices and the credit crunch, and start laying off workers or postpone hiring new staff.

The NSW economy is dominated by sectors vulnerable to interest-rate pressures and the global credit crunch, such as finance, property and retail sales. The state unemployment rate has already jumped from 4.2 per cent to 4.7 per cent this year, the highest rise in the country except for South Australia.

"I would assume the weakness would be concentrated in retail and construction, but we don't have the industry split," the chief economist of ABN Amro, Kieran Davies, said of the state's job losses.

Employers shed 19,700 jobs nationally last month, surprising market economists who had on average punted on a 13,500 gain.

The unemployment rate remained at 4.3 per cent, because the number of people actively looking for work also fell.

Businesses are typically reluctant to lay off staff, which means rising unemployment is usually one of the last signs that the economy is changing direction.

Mr Davies said he was increasingly of the view the labour market had started to turn down, and predicted unemployment would rise to 5 per cent this year.

If the unemployment rate had climbed to 5 per cent last month about 90,000 extra workers would have lost their jobs.

A speech today by the Reserve Bank governor, Glenn Stevens, on economic conditions could provide some hints on the outlook for interest rates. The chief economist at Lehman Brothers, Stephen Roberts, said the job losses "added materially" to the reasons why the Reserve would keep rates on hold.

The unemployment rate for men remained at 4 per cent but the rate for women inched a tenth of a percentage point higher to 4.6 per cent. The acting Prime Minister, Julia Gillard, said the fall in employment was a "sober reminder of the consequence of eight interest rate rises in a little over three years and slower global economic growth".


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