Australia Employment Slumps by Record 594,300

(Bloomberg) -- Australian employers slashed their workforces by the most on record last month amid a government lockdown to stem the spread of the coronavirus, sending the currency lower.

Employment slumped by 594,300 in April, exceeding the drop of 575,000 forecast by economists, data from the statistics bureau showed in Sydney Thursday. Unemployment rose just 1 percentage point to 6.2%, well below the estimated 8.2%, contained by a plunge in labor-force participation.

The underemployment rate rose to a record high 13.7%, up 4.9 percentage points, the Australian Bureau of Statistics said, as hours worked fell more than 9%. The Australian dollar extended declines, trading at 64.39 U.S. cents at 1:13 p.m in Sydney.

The employment collapse comes as companies ranging from Australia’s two major airlines to casinos and department stores furloughed or stood down tens of thousands of workers. The Reserve Bank of Australia predicts the economy will contract 10% from peak-to-trough this year and expects unemployment to surge to around 10% by June.

Governor Philip Lowe says hours worked will be a key metric to gauge the hit, as the government’s JobKeeper initiative that keeps workers attached to employers during the shutdown, and an expected fall in participation, limit some of the increase in the unemployment rate.

Treasurer Josh Frydenberg said shortly after the release that the JobKeeper program is providing support to 6 million workers.

Other details in the report showed:

• Monthly hours worked in all jobs slumped by 9.2% in April, with average hours worked around 30.1 per week, down from around 32 in March
• Full-time employment dropped by 220,500 and part-time plunged by 373,800
• At a state level, the biggest declines were New South Wales 221,400, Queensland 129,600 and Victoria 127,100. The unemployment rate increased in all states and territories
• The ABS estimates 2.7 million people were affected by either job losses or a reduction in hours between March and April

Qantas Airways Ltd. in March furloughed most of its 30,000-strong workforce and rival Virgin Australia Holdings Ltd. stood down 80% of its workforce. Star Entertainment Group Ltd. furloughed 90% of its 9,000 employees after the government ordered the closure of casinos.

Myer Holdings Ltd. temporarily shut all stores and retailer Premier Investments Ltd. closed all of its stores for about a month, standing down almost all 9,000 employees. Flight Centre Travel Group Ltd. said it was furloughing 3,800 people.

What Bloomberg’s Economists Say

“Containing the coronavirus outbreak has inflicted major damage on Australia’s labor market. Around 1 in 5 Australian workers lost their job, had their hours cut, or were stood down between March and April. ABS analysis indicates that the inclusion of workers that were stood down, or had zero hours available, equates to an unemployment rate of 11.7% -- a figure more comparable to Canada’s 13.0% unemployment rate and 14.7% in the United States.”

James McIntyre, economist

The initial closure of swathes of the economy had a dramatic impact on consumer and business confidence, with both plummeting in response. Sentiment regained some ground in the subsequent month, reports showed this week.

Authorities success in flattening the infection curve has improved sentiment and allowed restrictions to partially be eased. The government aims to reopen many parts of the economy by July and get 850,000 people back in jobs.

©2020 Bloomberg L.P.