Daily Commentary BY THE CURVE TEAM –

Employment Surprises on the Upside

18th of September, 2020

Employment numbers for August were far stronger than anticipated.

111 000 jobs were added in August. This takes the unemployment rate to 6.8%, down from 7.5%. This defied the expected rise in unemployment to 7.7% and corresponding 35,000 lost jobs expected.

Positively, the fall in unemployment was not simply due to the participation rate falling. The participation rate ticked up to 64.8% from 64.7%. Pre-Covid participation rates hovered around 66%, so there remains a hole to fill.

Over two thirds of the job gains were part-time employees. Interestingly, a large chunk of the job gains were classified as owner manager without employees.

There were large losses in this category early in the pandemic, but it is unclear whether it is simply those who lost work in these categories regaining work and how consequential these jobs will be for disposable income. Losses in this category somewhat reconciles the discrepancy of business surveys, which have indicated scaling back of employees was more on the agenda than adding employees.

A large hole still remains. Victoria lost 42 000 jobs over the period, and across the country there remains 52% of jobs lost since the start of the pandemic to be regained. Underemployment also did not budge in August, staying at 11.2%.

Containment of the virus and thereby avoiding lockdown measures remains key for the employment outlook. Over the last month confidence to contain the virus has increased as Victoria’s case numbers decline to less than 50 a day and the rest of the country record few cases. Should these trends continue, there will be an instant boost to employment as Victoria unwinds their lockdowns.

JobKeeper amendments that kick in as of October will hinder employment. The 3.5 million Australians receiving JobKeeper payments are expected to show up in the official unemployment figures as the stimulus measures are wound back. The official rate of unemployment will be less important than the fall in disposable income from the amendments, which will likely reduce consumption and by extension employment.

The medium to longer term outlook will depend on how quickly consumers shift to spend more, with saving rates currently a touch under 20%. It will also depend on how quickly the world economy opens up. If the movement of people can resemble pre-Covid levels, then industries such as education and tourism can begin to flourish.

Josh Stewart

Client Relationship Manager