Australian Unemployment Hits 10-Year Low Before Sydney Lockdown
Australian Unemployment Falls Further as Growth Upswing Persists
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Australia’s unemployment rate tumbled to a 10-year low in June, reflecting the economy’s powerful momentum in the lead-up to a five-week lockdown in Sydney that’s set to weigh on national activity.
The jobless rate declined to 4.9%, the lowest since June 2011, from 5.1% in May, the Australian Bureau of Statistics reported Thursday. The economy added 29,100 positions, driven by full-time roles, versus a forecast 20,000 gain, while the participation rate stayed at 66.2%.
Australia seems certain to take a hit from restrictions in its largest city to contain a highly contagious coronavirus variant: Greater Sydney accounts for about a quarter of the economy and just over a fifth of the national workforce. On the upside, the central bank and government are jointly pumping stimulus as they try to drive down unemployment to help revive inflation.
“We are likely to see a two‑speed labor market emerge over the next two months in the data -- New South Wales and the rest of Australia,” said Gareth Aird, head of Australian Economics at Commonwealth Bank of Australia. “The negative hit to the NSW labor market will be temporary provided the lockdown is not long-lasting.”
Sydney’s restrictions follow a two-week lockdown to contain an outbreak in Melbourne, with concern mounting that the variant spreading in the capital could leak to other states.
What Bloomberg Economics Says
“While Australia’s labor market appears to have tightened further there are challenges ahead. Lockdowns are likely to distort headline readings until August, and potentially later. Vaccinations will alleviate lockdowns, but also enable inflows of temporary foreign labor to resume, choking off skills shortages and wage rises.”
--James McIntyre, economist
Economists generally expect a hit to growth and jobs in the third quarter, with at least some of that made up in the final three months of the year, spurred by re-opening and a sharp ramp up in a vaccine drive that’s been sluggish to date.
“Hours worked decreased nationally,” Bjorn Jarvis, head of labor statistics at the ABS, said in a statement. “Hours worked data continues to provide the best indicator of the extent of labour market impacts from lockdowns.”
Among other details in today’s report:
- Monthly hours worked fell 1.8% in June
- Under-employment increased by 0.5 percentage point to 7.9%; and
- Under-utilization rose 0.3 percentage point to 12.8%
- Employment to population ratio increased to 63%
The Reserve Bank of Australia earlier this month opted against pushing out the horizon of its yield target while extending its quantitative easing program at a slightly reduced level. The government has joined forces with the RBA to try to drive unemployment down toward 4% in order to spur wage growth.
Australia had recovered rapidly from Covid-19 as authorities generally managed to contain outbreaks to isolated flare ups. But the current round of infections is proving problematic, given the highly infectious variant and the nation’s low level of vaccinations.
The fall in the jobless rate below 5% “will give the RBA some comfort as it assesses the likely impact of the current lockdown and changing circumstances,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada.
“There is enough flexibility in the RBA’s next phase of monetary policy and tapering to adjust if needed, should the hit to activity and the labor market prove larger and the recovery more muted,” she said.
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