Australian Unemployment Soars on Record Back-to-Back Job Losses

(Bloomberg) -- Australian unemployment surged in May as the economy posted its biggest back-to-back monthly job losses on record amid restrictions to stem the coronavirus outbreak. The currency tumbled after the release.

The jobless rate climbed to 7.1% from a revised 6.4% in April, the Australian Bureau of Statistics said Thursday. Employment plunged by 227,700 last month, while April’s fall was upwardly revised to 607,400. The result was almost three times the median estimate for a 78,800 drop, and worse than the forecast of every economist but one.

Participation tumbled to 62.9%, the lowest level since 2001, as people who lost their jobs saw little hope in searching for another. The Australian dollar fell after the release, trading at 68.58 U.S. cents as of 1:05 p.m. in Sydney.

“A combined group of around 2.3 million people -- around 1 in 5 employed people -- were affected by either job loss between April and May or had less hours than usual for economic reasons in May,” said Bjorn Jarvis, head of labor statistics at the ABS.

Youth Employment

The path ahead looks more promising as infection rates have fallen and the economy is being reopened in stages. The question is how much Thursday’s data will impact sentiment, given consumer confidence returned to near pre-coronavirus levels in June and the central bank suggested the downturn might be “shallower” than earlier thought.

In a joint press conference with Prime Minister Scott Morrison following the jobs release, Treasurer Josh Frydenberg said young people had been particularly affected as the lockdown hit the hospitality and retail sectors. Youth employment plunged by around 103,000, making up 45% of the jobs lost in May, and youth unemployment climbed to 16.1%, he said.

“While devastated by the number, I am sadly not surprised,” Morrison told reporters in Canberra, adding that jobs for young people should be the first to bounce back. “These are our dark times, but I can see that ray of light.”

The data also showed:

• Full-time employment fell 89,100, while part-time tumbled 138,600
• The under-utilization rate that combines unemployment and under-employment was almost unchanged at 20.2%
• Monthly hours worked fell 0.7% in May and are down 10.2% since March, as April’s decline was revised upward to 9.5%

The RBA has said that hours worked will be a key metric to gauge the hit to the economy, as the government’s JobKeeper initiative keeps workers attached to employers during the shutdown. Together with the fall in participation, that limits some of the increase in official unemployment.

On a more positive note, the central bank said this month that while job losses and fewer hours for those still in work had reduced income, government support had provided a considerable offset.

“Households that were already receiving welfare payments had received additional payments, and the JobKeeper program and increased JobSeeker payments had supported incomes for others,” the RBA said in minutes of its June policy meeting released Tuesday.

Yet there’s a lot of slack in the labor force to be absorbed in coming months. Qantas Airways Ltd. furloughed most of its 30,000-strong workforce in March, and rival Virgin Australia Holdings Ltd. stood down 80% of its workforce. Star Entertainment Group Ltd. furloughed 90% of its 9,000 employees.

Part of the improved outlook is due to Australian authorities’ success in flattening the curve of new infections, allowing them to relax lockdown restrictions early.

©2020 Bloomberg L.P.