HOBART, Oct 9 (Reuters) - Australia's labour market could besofter than suggested by its low unemployment rate in part dueto surprising weakness in home building, a top central bankersaid on Tuesday, citing this as one reason for a recent cut ininterest rates.
Giving a speech in Tasmania, Reserve Bank of Australia (RBA)Deputy Governor Philip Lowe said a pick up in home construction,and employment, would be welcome in coming months as hiring inthe once red-hot mining sector cooled.
"This weakness in the construction sector, particularly ofnew homes, has been one of the bigger surprises in the economicoutcomes over recent times," said Lowe.
"Looking forward, a pick-up in construction activity is oneof the factors that could provide an offset to the eventualmoderation in the current very high level of investment in theresources sector."
When the central bank cut interest rates a quarter point to3.25 percent last week it noted that the peak for mininginvestment could come next year, somewhat earlier thanpreviously thought.
Since miners have been big employers in the last couple ofyears, any pullback in this sector would require increasedhiring elsewhere if unemployment was not to rise.
Mining giant BHP Billion on Tuesday said it plansto cut an undisclosed number of jobs as it copes with weakerdemand and prices, higher costs and a strong local dollar.
Australia's jobless rate is currently low at 5.1 percent andhas been around there for much of the past two tears.
However, Lowe noted that the unemployment rate had been helddown by a decline in labour force participation, or the share ofthe working-age population either with a job or looking for ajob. At 65.0 percent, this was around half a percentage pointlower than the average of the past five years.
One factor in this decline could be weakness in theconstruction industry, where employment has fallen by 70,000over the past 12 months. Many of these workers identifiedthemselves as self-employed and were not recorded as unemployedin the official labour survey.
"If this were the case it would suggest that there is a bitmore capacity in the labour market than suggested by theunemployment rate alone," said Lowe.
Another factor could be the faster pace of turnover in thejobs market seen in recent years. Lowe suggested some workersthat had left their jobs might have decided not to re-enter thelabour market immediately, perhaps choosing to enter training oreducation instead.
"With the peak in mining investment now coming into view, itis not surprising that attention is turning to the questions ofwhat forms of activity might pick up, where the future jobsmight come from, and what combination of interest rates andexchange rates might keep the overall economy on an even keel,"added Lowe.
(Reporting by Wayne Cole; Editing by Lincoln Feast)
Keywords: AUSTRALIA ECONOMY/CENBANK