Australian October Employment Soars as Victoria’s Lockdown Lifts

(Bloomberg) --

Australian employers unexpectedly added tens of thousands of jobs in October as Victoria’s tough Covid restrictions began to lift and the state’s workers returned to the labor force, while a recovery in the rest of the economy gathered pace.

Employment soared by 178,800 last month, defying economists’ expectations of a 27,500 decline, data from the statistics bureau showed Thursday. The jobless rate edged up to 7% from 6.9% in September as the participation rate jumped almost 1 percentage point to 65.8%.

“Encouragingly, the rise in employment was also accompanied by a strong rise in hours worked, particularly in Victoria,” said Bjorn Jarvis, head of Labor Statistics at the ABS. Since starting to ease restrictions in October, Victoria’s employment increased by 81,600 people, or 2.5%.

The Australian dollar edged higher after the release and was trading at 72.92 U.S. cents at 4:20 p.m. in Sydney.

Melbourne’s restrictions began to ease in October as a severe cluster of Covid-19 infections was finally brought under control. As Victorians return to the labor force, the Reserve Bank of Australia expects the jump in participation will push up the jobless rate to a peak of just under 8%.

The rest of the country, meantime, has been recovering at various speeds. The central bank predicts the economy expanded in the third quarter as confidence among households and businesses strengthened.

What Bloomberg Economics Says

“The early arrival of Victoria’s economic recovery delivered a surprise boost to the jobs data. The wider removal of restrictions in late October should see a further bounce in the November employment data. But beyond that, the challenge of significant labor market slack remains. While welcome, the risks lie with policymakers mistakenly responding to early gains with a pullback in stimulus, resulting in a longer, more subdued, recovery over coming years.”

-- James McIntyre, economist

For the full note, click here

Among other details in today’s jobs report:

• Monthly hours worked increased by 1.2% in October
• Under-employment fell by 1 percentage point to 10.4% and under-utilization declined by 0.9 percentage point to 17.4%
• Full-time jobs surged by 97,000 and part-time roles 81,800
• Victoria’s participation rate increased 2 percentage points

In an effort to capitalize on the virus’s retreat, the RBA this month injected a new round of monetary stimulus. It cut the key interest rate, yield-curve target and bank lending facility rate to 0.10% from 0.25% and unleashed a A$100 billion ($73 billion) quantitative easing program.

For its part, the government has a highly stimulatory budget that includes cuts to income tax, incentives for companies to hire and invest and additional infrastructure spending to boost activity. State governments are also unrolling programs to support jobs and growth.

“While we caution against month-to-month volatility in the data, the outcome supports our view that Australia’s labor market is now ‘past peak slack’ and can recovery fairly rapidly going forward as restrictions are eased further,” Goldman Sachs Group Inc. economists led by Andrew Boak said in a research note Thursday.

Victoria is Australia’s second most populous state and accounts for about a quarter of gross domestic product. While it is beginning to return to normal, a new outbreak in South Australia prompted the state government there to impose a severe six-day lockdown.

Australia’s better economic outlook combined with stronger commodity prices have fueled a 27% appreciation in the exchange rate since mid-March lows. The RBA has said that while this is line with fundamentals, a weaker currency would aid the recovery.

©2020 Bloomberg L.P.