Australian Unemployment Jumps to 5.2% in Lockdown Hangover
Australian Unemployment Jumps to 5.2% in Lockdown Hangover
(Bloomberg) -- Australian unemployment jumped in October as the economy unexpectedly shed jobs, signaling a delay in the labor market’s bounce-back from lockdowns and underscoring the need for ultra-low interest rates.
The jobless rate advanced to 5.2% from 4.6% in September and above economists’ forecast of 4.8%, Australian Bureau of Statistics data showed Thursday. Employment dropped by 46,300 roles, its third monthly decline, compared with economists’ estimate for a 50,000 increase.
Australia’s benchmark three-year bond yield initially trimmed gains after the data, before recouping the move to trade at 1.04% as markets viewed the job weakness as likely temporary. The 10-year yield followed a similar path and was at 1.84%. The Australian dollar edged down to trade at 73.22 U.S. cents.
The Reserve Bank of Australia has been under pressure from the bond market over faster consumer-price growth locally against a backdrop of rising global inflation concerns. That narrative was only reinforced when U.S. consumer prices rose last month at the fastest annual pace since 1990.
“Many of the workers who were unable to work during lockdowns re-entered the labor force in early October to look for work, leading to a spike in the unemployment rate,” said Sarah Hunter, chief economist for BIS Oxford Economics. The fall in employment was concentrated in Victoria state which “likely reflects the tail end of restrictions on activity,” she said.
Employment in Victoria fell by 49,600 people, while New South Wales posted an increase of 21,700.
The release covered the period from Sept. 26-Oct. 9, when Sydney and Melbourne were only about to emerge from months-long lockdowns.
What Bloomberg Economics Says...
“An easing of restrictions through mid-late October is likely to see the labor market rebound through November and December. But the lift in the unemployment rate could persist, if the recovery in participation outpaces the return of jobs.”
--James McIntyre, economist. For the full report, click here
The RBA is running record-low rates to support the economy and ultimately aiming to push down unemployment in order to spark faster wages growth.
The central bank sees this as its best means to return inflation sustainably to the midpoint of its 2-3% target, which policy makers expect will take about two years. Today’s jobs report, while only one month, is likely to add ballast to Governor Philip Lowe’s view that rates are only likely to rise from the current 0.1% in 2024.
Markets are more optimistic on the recovery and are challenging the RBA’s view by pricing in at least three rate increases next year.
Among other details in today’s report:
- Part-time roles fell by 5,900 while full-time positions dropped by 40,400
- The participation rate edged up to 64.7% in October from 64.5%
- Under-employment increased 0.3 percentage point to 9.5%
- Under-utilization climbed by 0.9 percentage point to 14.7%
- The employment to population ratio fell to 61.3%
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