Daily Commentary BY THE CURVE TEAM –

Lockdowns Weigh on Jobs

23rd of July, 2021

As expected, lockdowns are weighing heavily on activity and jobs.

The full effects of the lockdowns will be slow to flow through to economic data. Weekly payrolls are the closest real time estimate of the impact on jobs.

Payrolls for the two weeks to July 3 fell 1%. Four cities were in lockdown over the sample period, albeit not for the entire two weeks. It also coincided with school holidays which can seasonally reduce payrolls.

Greater Sydney payrolls fell 1.9%, Adelaide fell 0.7%, WA fell 1.1% and Northern Territory fell 1.4%. All these areas were affected by lockdowns over the survey period.

Even Melbourne payrolls fell 0.8% despite being out of lockdown, which could signal the rebound in jobs may not be as robust as expected. Although payrolls are typically volatile so should be viewed with that caveat.

Payrolls in areas not affected by lockdowns were less affected. However, the inability of people in lockdown to travel to other areas and the uncertainty caused by covid will weigh on activity and sentiment.

Since the survey, while SA, NT and WA have unwound their lockdown restrictions, the NSW lockdown has become stricter and prolonged. In addition, Victoria and SA are currently in lockdown periods.

The next labour force survey and payrolls will be for the two weeks until July 17, which does not incorporate the latest lockdowns. Therefore, it will be some time before the effects of spontaneous lockdowns are captured in the data.

One real time estimate of activity, using real time movement and spending patterns, shows activity across the country is back to October 2020 levels.

Markets, the RBA and seemingly consumers and businesses are seeing past the latest lockdowns. They are confident that they will be contained, and activity will restart its resurgence.

However, the longer these lockdowns persist, the more likely this optimism will shift. It could also force the RBA into maintaining easier policy for longer which would weigh on rates.

Josh Stewart

Associate - Money Markets