Australia’s Job Market Divides Into Three as Covid Hinders Recovery
Pedestrians cross a road along Market Street in the central business district in Sydney, Australia. (Photographer: Lisa Maree Williams/Bloomberg)

Australia’s Job Market Divides Into Three as Covid Hinders Recovery

Australia is showing increasing signs of a three-speed labor market, with real-time data underscoring the importance of successful virus containment so firms can reopen with confidence and employees can return to work.

After an almost uniform pickup from April lows amid the national lockdown, payrolls in Victoria, New South Wales and Western Australia diverged in late June. Employment in Victoria began to collapse as surging infections forced the reintroduction of tough restrictions; New South Wales flatlined as Sydney contended with outbreaks; and Western Australia, virus-free and sealed off, kept improving.

“There’s an emerging three-speed dynamic in Australia’s labor market, and economy more broadly,” said James McIntyre, an economist with Bloomberg Economics in Sydney. “Australian data from July onward will be affected by these cross-currents until successful containment is achieved in the virus states.”

Australia’s Job Market Divides Into Three as Covid Hinders Recovery

The outcomes underscore central bank Governor Philip Lowe’s warning that the recovery depends on a vaccine for Covid-19, which would allow Australians to feel confident about their health. Short of that, states like New South Wales that are constantly battling virus hotspots will struggle with fragile sentiment that discourages firms from hiring and households from spending.

Australian consumer confidence plunged in August, data showed Wednesday, with Melbourne’s tougher lockdown to counter spiraling inflections damaging the state’s outlook. From there, a wave of uncertainty swept across the rest of the country, with New South Wales particularly hard hit. The Westpac Banking Corp. survey also showed unemployment expectations jumped 14.6%.

“Consumers across the nation appear to have been rattled by the developments in Victoria and fear that other states may also succumb to the ‘second wave’ outbreak,” said Bill Evans, chief economist at Westpac.

Separate government data today showed wage growth in the second quarter slowed to the weakest pace in the 27-year history of the series.

At present, Western Australia, Queensland, South Australia, Tasmania and the Northern Territory have the virus under control. By shutting their borders to the rest of the country, they have managed to create economic bubbles that allowed them to reopen bars and other services.

That’s sparked a revival in job advertisements for sectors like dental, personal care and beauty services, said Callam Pickering, an economist at global jobs website Indeed Inc.

In Western Australia, even the most-affected sectors from the virus -- like arts, food and accommodation -- are nearly back to pre-Covid levels.

Australia’s Job Market Divides Into Three as Covid Hinders Recovery

Yet in New South Wales, where another outbreak remains a realistic threat -- particularly with hard-hit Victoria on its southern border -- the upturn in ads and hiring is milder.

“We share a border with that state and we’ve had an increased rate of transmission, albeit very minor,” said Matthew Gribble, managing director for Australia at recruitment agency Michael Page Intl Plc in Sydney. “But all of those sort of things chip away at confidence a little bit.”

Western Australia is finding that remoteness isn’t its only advantage: It’s also a resource hub. With the price of iron ore surging above $100 a ton on Chinese demand, Western Australia is enjoying a windfall that’s encouraging miners to hire.

“Mining has also continued to buoy the state’s job market,” Indeed’s Pickering said. “The recovery is continuing for everyone else, but we’re basically back at stage 1 for Victoria.”

©2020 Bloomberg L.P.

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