Australia’s unemployment rate falls below 5% for the first time in 10 years
With the unemployment rate hitting its lowest level in a decade, you’d expect the federal government to celebrate loudly.
- Unemployment rate drops to 4.9% from 5.1%
- This is the lowest unemployment rate in a decade
- Closures in New South Wales will impact employment data in the coming months
But Prime Minister Scott Morrison held a press conference Thursday to announce plans for more emergency stimulus payments, this time for workers in Victoria.
The recent outbreak of the Delta COVID strain in NSW, which the Berejiklian government has struggled to contain for weeks, has now spread to Victoria.
And it threatens to derail the economic recovery in Australia’s two most populous states.
âThe Australian labor market saw exceptionally strong momentum at the end of 2020/21,â said Gareth Aird, Australian economy manager at the Commonwealth Bank.
âBut things have of course taken a dramatic turn in NSW due to the foreclosure of Greater Sydney.
Sydney lockdown could cost 200,000 jobs
However, the Delta outbreak in NSW and the new closures in Victoria have made the economic outlook much less certain in the short term.
âA seven-week lockdown in Greater Sydney could see a significant number of NSW workers pull out,â Mr. Aird said.
Overall, we’ll likely see a two-tier labor market emerge over the next couple of months in the data – NSW and the rest of Australia.
“Government stimulus payments will facilitate a sharp rebound in jobs after the lockdown ends, but at this point, the date on which the restrictions are relaxed is unknown.”
Economists say the next two months of unemployment data will show the impact of the closures in Greater Sydney and Melbourne.
Tapas Strickland, director of economics at the National Australia Bank, said the Sydney epidemic is likely to hurt national economic growth.
“I think it will potentially have a very big impact,” he said.
âThe size of the New South Wales economy is around 35% of Australia’s GDP, so Sydney has a very large share of the national economy.
“We believe that each week that Sydney is on lockdown costs the Australian economy about $ 700 million to $ 1 billion per week, and factoring in a lockdown of about six to eight weeks potentially means you get a negative episode of economic activity in the third quarter. “
Dr Sarah Hunter, chief economist for Australia for BIS Oxford Economics, said the two-week lockdown in Victoria in late May and early June resulted in an 8.4% drop in hours worked in the state, but employment in the state fell only 0.3 percent. one hundred month after month.
“While the lockdown in NSW has already lasted longer (and will last at least two more weeks), today’s data suggests the impact on jobs will hopefully be limited.” , she said.
Closing borders helps generate unemployment at decade low
Before the latest closings, the unemployment rate fell to 4.9% in June, with nearly 30,000 jobs created according to official data from the Bureau of Statistics.
It has now declined for eight consecutive months, taking it to its lowest level in a decade.
The activity rate, measuring people aged 15 and over in employment or looking for work, remained stable at 66.2%.
However, as the unemployment rate rose from 5.1 to 4.9 percent last month, the underemployment rate jumped half a percentage point to 7.9 percent.
This increase in underemployment stems from a 1.8 percent drop in hours worked last month, which means 33 million fewer hours were worked across the economy.
This was mainly due to the impact of Victoria’s last instant lockdown, which happened during the investigation period.
Marcel Thieliant, senior economist for Australia and New Zealand at Capital Economics, said the size of the workforce only increased by 7,000 people in June as border closures restricted the ‘immigration.
And with the participation rate remaining stable, it helped the unemployment rate drop to its lowest level in a decade, he said.
“With the border set to remain closed at least until the end of the year, labor force growth will remain subdued, so even small job gains will lead to a further decline in the unemployment rate,” he explained.
“The result is that wage growth is expected to start to accelerate seriously soon, prompting the Reserve Bank to tighten policy by early 2023.”
Mr Aird said ahead of the outbreak in New South Wales, key indicators suggested the labor market would continue to tighten “very quickly”.
âThere have been a record number of vacancies in all fields – by skill level, industry and jurisdiction,â he added.
House prices rise as closures continue
It was a situation Ross Nesdale had used to his advantage.
Mr Nesdale started working as a real estate agent about two months ago, and it was a change for the 52-year-old, who was already no stranger to changing careers.
After a successful rugby career in the late 1990s which saw him play for Ireland in the 1999 Rugby World Cup, Mr. Nesdale was until recently working in marketing.
But he switched to real estate as the industry adjusted to some of the strangest conditions in years, with record interest rates set to stay low for many years, causing house prices to soar. real estate throughout the country.
âDuring the two months of my job search, it was very targeted [for me],” he said.
“It’s an interesting time in real estate right now with COVID and all the struggles around it, but it’s working really well.”
A “plan” to reduce unemployment
Mr Aird said the impact of fiscal policy on the labor market over the past year shows what can be achieved with the policy.
âIt’s amazing to think that in June 2021 Australia had its tightest job market in ten years after its first recession in three decades,â he said.
“The plan is there to achieve a very tight labor market again, as vaccinations are fully rolled out.”