Daily Commentary BY THE CURVE TEAM –

Employment Surge Continues

15th of July, 2021

The recent surge in employment, which is putting more pressure on central banks, continued in June despite covid scares.

An additional 29 100 people were employed over June, leaving employment 1.2% higher than March last year. Encouragingly, full time employment rose 51 600 and part time decreased 22 500.

It leaves unemployment at 4.9% from 5.1%, with no change in the participation rate. According to Governor Lowe in his speech last week, unemployment below 5% is when wages begin to creep up based on industry analysis.

As covered in the monthly insights, the lift in employment is being influenced by the void of overseas workers rather than demand, with total jobs including overseas workers still down on pre covid levels. The outlook for employment remains strong, with the recent business survey and job ads signalling a push for new employees despite covid outbreaks.

However, the covid outbreaks did affect the employment numbers and poses a downside risk for the outlook. Hours worked decreased 1.8% and underemployment increased 0.5% points to 7.9%, as the survey was taken during the two weeks to June 13 when Victoria was in lockdown.

Victorian hours worked were down 8.4% and employment fell 0.3% points so skewed the numbers. With covid outbreaks over July, future data will likely see further falls in hours worked in underemployment, and employment may not sustain its successive gains. Victoria going into a five day lockdown as of today will weigh even more on the survey.

As has been covered in recent dailies and the monthly commentaries, the consensus is that once outbreaks are contained, employment will resume its strong growth. This is still evident in business surveys and consumer confidence, which remain strong despite the outbreaks, showing that people are seeing beyond the outbreaks.

The RBA will eagerly monitor for any evidence of wage growth should unemployment continue to track lower.

Josh Stewart

Associate - Money Markets