Australian employment unexpectedly fell for a second consecutive month in June, lifting the jobless rate from a 23-year low and diminishing the case for an imminent rise in official interest rates.
Employment fell a seasonally adjusted 3,800 in June in data released on Thursday when forecasts centred on a 25,000 increase, although official trend estimates still show rising employment over the past year.
No economist polled by Reuters had expected an employment fall for June.
Full-time employment rose 39,300, but that was more than offset by the loss of 43,100 part-time jobs.
"To me the overall mix is still consistent with an overall economy that is slowing and I think that will continue to put upward pressure on the unemployment rate in the second half of the year," said Glenn Maguire, chief economist at SG Australia.
The unemployment rate rose to 5.6 percent when it was expected to remain at a 23-year low of 5.5 percent, but the trend here also pointed to a falling jobless rate for over a year.
The June participation rate of those in or actively seeking work stayed at 63.5 percent when a small rise was expected.
Ninety-day bank bill futures, which indicate market thinking on the monetary policy outlook, rose on the data, although the September contract still implies a yield 26 basis points above the 5.25 percent cash rate.
The Australian dollar fell around a quarter cent to just above 72 US cents on the weaker-than-expected jobs report before steadying.
Treasurer Peter Costello said there had been a switch to full-time jobs in the past year, adding: "That is evidence of strong growth in the labour market and what we see from forward indicators is that jobs growth should continue."
Some economists also held that view.
"It's a strong number disguised as a weak number," said Michael Workman, senior economist at Commonwealth Bank of Australia.
"Full-time jobs have risen by 218,000 over the past year. That's enough to keep this downward pressure on the unemployment rate. Undoubtedly, the way the jobs market is going, it's one of those issues that would lead towards another rate rise later this year," Workman said.
The Reserve Bank of Australia, the central bank, left the cash rate unchanged this week for a seventh consecutive month.
The central bank lifted the cash rate in two quarter-point steps in the fourth quarter of 2003 to combat ballooning household debt in the face of a prolonged housing boom.
While the higher rates appeared to have an initial impact, recent data suggests consumers were getting used to stable rates again with credit growth remaining at stubbornly high levels.
Low unemployment, high levels of consumer confidence and still relatively low interest rates have made consumers happy to take on debt, particularly to buy homes.
Economists generally expect one more rate rise in the next 18 months, and some think the central bank could tighten as early as August if data in the next month shows strong mortgage demand.
Still, analysts said an interest rate rise is likely to depend on the timing of the Federal election, which could be called for August but was more likely to take place in October.