The increase in unemployment according to the Australian Bureau of Statistics was worse than the markets had expected. The Australian dollar eased to a one-month low of 73.17 US cents in the wake of the report’s release as investors pared back expectations of an early move by the Reserve Bank to raise interest rates.
Labour force figures are notoriously volatile, with the Covid disruptions making estimates more difficult. The ABS survey covered the period from 26 September to 9 October, which included a jump in Census-related jobs but also the depths of the lockdowns in the major states of NSW and Victoria.
Pushing the jobless tally higher was an increase in some states of the number of people looking for work, with the so-called participation rate rising from 64.5% in September to 64.7% last month. The increase was the first since June.
NSW appears further out of the Covid-induced economic downturn than Victoria.
Last month, 57,000 more people in the state – which accounts for about one-third of the national economy – started looking for work, of which 22,000 succeeded. That still leaves the participation tally about 218,000 down on the number in May.
“In contrast, while Victoria’s unemployment also increased, by 29,000 people, employment fell by a further 50,000, with their participation rate falling by 0.4 percentage points,” Bjorn Jarvis, head of labour statistics at the ABS, said, adding the state’s workforce also remained 113,000 lower than in May.
“It may seem counterintuitive for unemployment to rise as conditions are about to improve,” Jarvis said. “However, this shows how unusual lockdowns are, compared with other economic shocks, in how they limit being able to work and look for work.”
NSW’s jobless rate rose 0.8 percentage points last month to 5.4%, Victoria’s gained 0.9 percentage points to 5.6%, while the ACT’s lockdown saw the rate jump by half 6.6%. At 5.2%, the unemployment rate is close to pre-pandemic levels.
Several central banks, including the Reserve Bank of Australia, have lately lamented the challenges facing forecasters.
On the one hand, consumers and businesses have been loaded up with billions of dollars in Covid support. There is also the added “wealth effect” of rising housing prices in many markets, the single largest assets for most people.
On the other, there are many supply disruptions from Covid outbreaks, and policymakers can’t be sure if there is vaccine-resistant strain around the corner.
“I think everything’s set up for a cracking 2022 provided we don’t have any more issues on the Covid front,” Gareth Aird, head of CBA’s economics team said ahead of today’s release. “In terms of what you can forecast things look very good.”
Sarah Hunter, the chief Australia economist for BIS Oxford Economics, notes the national hours worked tally eased 0.1% in October, but again Victoria was the main drag.
“Total hours worked in NSW and the ACT rose strongly (+3.9% and +3.1%, respectively) on the month, a clear indication that businesses in both regions were gearing up for reopening through this period,” Hunter said. “There was also a sizeable decline in the number of people working fewer or no hours for economic reasons, further confirmation that the east coast states are in recovery mode.”
Federal treasurer Josh Frydenberg said the data showed the economy had “turned the corner”.
“Business and consumer confidence are both up, our business confidence [is] back to where it was in April,” he said.
“Consumer confidence [is] now up eight out of the last nine weeks. Job ads are more than 30% higher than they were at the start of the pandemic and at a 12-year high.” He said “$340bn is now accumulated in household and business balance sheets”.
Last Friday, the RBA’s quarterly monetary policy statement showed the central bank is expecting the jobless rate to “be a little below 5% at the end of 2021, and is forecast to decline steadily from there, reaching 4% by the end of 2023.
“The participation rate is expected to bounce back quickly to historically high levels, in contrast to the experience of some other advanced economies,” the RBA said.
Westpac, which was close to picking the jump in jobless numbers with its 50,000 loss prediction, said it remains unclear how many people will resume job hunting, and therefore, what the unemployment rate will be.
“We currently have unemployment peaking at 5% in December as the re-opening of the economy would generate a short-run mismatch between workers returning to the labour force and when they started new jobs,” Westpac senior economist Justin Smirk said in a briefing note. “The October update suggests workers are returning workers at a much faster pace than anticipated.”
ANZ senior economist Catherine Birch said her bank anticipated a rapid post-lockdown rebound in employment and hours worked over coming months.
“Newly lodged job ads have jumped 39% over the past two months in NSW,” Birch said. “Over the past month, they’ve lifted 15% in Victoria and 12% in the ACT, to be at or above pre-lockdown levels, according to the Internet Vacancy Index.”
