Dreadful news on the jobs front.

The low light is a 6.4 per cent unemployment rate – a 12 year high for that measure. Add to that a 9 year low for the employment to population ratio and almost no net increase in employment for the last four months and you have a picture where the jobs market is telling the world (including the RBA), that the rate of economic growth remains below trend.

Curiously, at its meeting just two days ago, the RBA Board noted “There has been some improvement in indicators for the labour market this year” and to be sure, there was. But with this update on the jobs market, it seems that ‘improvement’ was short lived.

In simple terms, there is a growing degree of slack in the labour market and this clearly accounts for the fact that real wages are falling. There are signs that inflation is also cooling with the monthly TD-MI Inflation Gauge tilting lower in July while the fall in commodity prices and the terms of trade continues unchecked.

While consumer confidence and business expectations have firmed since the shock of the budget, they remain fickle.

Retail sales fell in the June quarter, building approvals are trending down and net exports look like subtracting from GDP. The Australian dollar is ridiculously over-valued and the RBA needs to cut interest rates if it is to stop the unemployment rate exceed 6.5 per cent or even hitting 7 per cent especially with fiscal policy caught between ineptitude and a cranky Senate.

There was a bit of a fuss about whether the new ABS methodology artificially inflated the unemployment rate, but the ABS categorically noted:

“There is no evidence that the introduction of the new active job search steps and the changing of two active steps to passive has had a significant impact on the estimates for unemployment.”

Which means the numbers are shocking and a policy easing is needed – maybe next month.