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INSTANT VIEW 3-Australia jobless rate climbs to 5.4 pct, employment up

SYDNEY, Oct 11 (Reuters) - Australia's jobless rate rose to5.4 percent in September as more people joined the workforce,but employment also increased by more than expected, sending thelocal dollar higher.

Thursday's data from the government showed jobs rose by aseasonally adjusted 14,500 in September.

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KEY POINTS:

- Sept employment +14,500 mth/mth, seasonally adjusted

(Reuters poll: +3,750)

- Sept full-time employment +32,100, part-time -17,700

- Sept unemployment rate 5.4 percent, s/adj (poll 5.3)

- Sept participation rate 65.2 percent, s/adj (poll 65.0)

- August's unemployment rate unrevised at 5.1 pct

- For a brief data table click on

COMMENTARY

TOM KENNEDY, ECONOMIST, JPMORGAN

"This result is more in line with what the RBA thinks.Unemployment rate has been very low so far this year...ourforecasts, as with the RBA, ...by the end of the year theunemployment rate being at 5.5 percent. It's getting there.

"It's getting to the stage where we all thought it would beand we will see more of that as the participation normalisesmore over the coming months.

"Our forecasts are for the RBA board to cut rate again inDecember and again in February...nothing really fundamentallychanges. The RBA will maintain their easing bias. Today'sresults just really support that."

SU-LIN ONG, SENIOR ECONOMIST, RBC CAPITAL MARKETS

"It's the unemployment rate that best captures theunderlying health of the labour market, it's broken out of this5 to 5.3 percent range, which it's been in for some time. At 5.4percent it's the highest since the early part of 2010.

"Part of it is the higher participation, but what's reallydriving it is the rise in unemployed persons in the month, andthat's consistent with a reasonably soft labour market, and theleads are pointing to further softness consistent with thewaning in growth momentum. So we'd expect the labour market toease off further and the unemployment rate to move higher.

"The unemployment rate is consistent with increasing slackin the labour market and further (rate) cuts. Whether it's nextmonth or December is debatable, we are leaning to November."

MICHAEL BLYTHE, CHIEF ECONOMIST, COMMONWEALTH BANK OFAUSTRALIA

"It doesn't make the story any clearer, with a decent risein employment, but unemployment up as well. The overallimpression when we smooth all these trends out is it's still apretty soft labour market overall.

It's still a case of easing bias here. The Reserve Bankstill expects unemployment to rise. They obviously interpret thelabour market now as soft as they've said. Given some of theglobal concerns that are still playing out the risks still pointto lower rates. We think we'll see another move (down) inNovember."

PAUL BRENNAN, HEAD OF ECONOMIC AND MARKET ANALYSIS,CITIGROUP

"It's broadly consistent with what we were thinking thatlast month's figures understated the unemployment rate. It'sgood there has been an increase in employment, but the realityis that it's not enough to keep unemployment steady.

It's all pretty consistent with the fact the economy hasslowed a bit, below potential growth, and that's affecting in ahigher unemployment rate. The expectation is it will rise a bitfurther yet before the interest rate cuts kick in."

PETER ESHO, ANALYST, CITY INDEX

"The headline unemployment rate is worse than expected butnot because jobs growth has been poor. The RBA can probably buya little more time to see the impact of its recent cuts and arecovery in commodity prices, like iron ore, before it is forcedto move again. We maintain our view that February is more likelythan November to see another 25 basis point cut."

MARKET REACTION:The Australian dollarrose more than a third of acent to $1.0258 on the data. Interbank futures

still

imply rates at 3 percent by Christmas with a better than evenschance of a cut next month.

LINKS:

The Australian Bureau of Statistics Web site is:

BACKGROUND:

- The median forecast had been for slight a rise of 3,750 inSeptember employment. Estimates for this volatile series rangedfrom a fall of 8,000 to an increase of 20,000.

- The jobless rate was seen rising to 5.3 percent, followingAugust's surprise dip to 5.1 pct, with a range of 5.2 percent to5.3 percent.

- The jobless rate has been remarkably steady around 5.2 pctfor months now even though employment growth has been subdued.That was partly due to an unusually large fall in theparticipation rate, which has dropped a full percentage pointsince late 2010 to stand at a five-year low of 65.0 pct.

- RBA policymakers suspect the fall in participation meansthe labour market is softer than implied by the jobless ratealone, which is a major reason they chose to cut interest ratesthis month.

- Most leading indicators of employment point to only modestgrowth ahead and a likely gradual rise in the jobless rate,which would add to the case for further monetary stimulus.

(Reporting by Wayne Cole)

((Wayne.Cole@thomsonreuters.com)(612 9373 1813)(ReutersMessaging: wayne.cole.thomsonreuters.com@reuters.net))

Keywords: AUSTRALIA ECONOMY/