Australia Posts Record Monthly Hiring Gain, Job Hunt Resumes
Australia posted its largest monthly jobs gain on record in June as the economy reopened from its Covid-19 lockdown, while a surge in people seeking work triggered a jump in the unemployment rate.
Employers added 210,800 roles, more than double estimates, after May’s job losses were revised higher to 264,100, data from the statistics bureaushowed Thursday. The unemployment rate advanced to 7.4% from 7.1% as the participation rate surged to 64% in June from 62.7% a month earlier.
The hiring spurt reflects Australia’s earlier than expected reopening of the economy following the containment of the virus. These gains are at risk of reversing with metropolitan Melbourne, the nation’s second-largest city, returning to a six-week lockdown and new cases emerging in outer Sydney. Victoria reported 317 new Covid-19 cases Thursday, the state’s biggest daily increase.
“There are clearly encouraging signs in the data, with Australians re-entering the labor force, particularly the younger cohort who tend to work in hospitality,” said Su-Lin Ong, head of economic and fixed-income strategy at Royal Bank of Canada. “But the data pre-date Victoria, which accounts for a bit over a quarter of total employment, so we’re likely to see some setbacks in July and August.”
The second wave of infections creates greater focus on the government’s fiscal and economic statement next week, when it’s due to provide an updated outlook for the next two years and lay out its intentions for fiscal stimulus programs, given most are due to expire in September.
Prime Minister Scott Morrison on Thursday announced a A$2 billion ($1.4 billion) jobs training package that will see the government extend its apprenticeship support package to small and medium-sized businesses, and initiate a new program for vocational training.
“In July, I expect we will see impact from Victoria,” Morrison told reporters. But “we’ve seen Australians get back into work and this has been a core objective of our approach over these past many months and it remains the focus of our approach together with managing the health situation in Victoria and other states as outbreaks and other challenges emerge.”
The Australian dollar extended earlier declines after the data and was trading at 69.90 U.S. cents as of 1:04 p.m. in Sydney, having touched a one-month high of 70.63 cents on Wednesday.
Treasurer Josh Frydenberg said earlier this week that the effective unemployment rate was at 13.3%, which included people who have dropped out of the labor market, as well as those unemployed.
Among other details in today’s jobs report:
Monthly hours worked increased by 4% from a month earlier
Under-employment fell by 1.4 percentage points and under-utilization fell 1 percentage point to 19.1%
Full-time jobs fell 38,100, while part-time roles soared by 249,000
What Bloomberg’s Economists Say “Labor demand recovered strongly in June, following the easing of restrictions through May. The real labor market story is in hours worked, which have recovered more than one-third of the hit to labor demand over the lockdown period. While jobs are rebounding, the key to labor market recovery is how quickly hours of work return. Until they do, the overhang of unemployed and underemployed workers is set to weigh on wages and inflation for some time.” James McIntyre, economist
The Reserve Bank of Australia has kept its benchmark interest rate near zero since March and says it’s unlikely to change this stance until inflation and unemployment are comfortably within their targets of 2%-3% and under 5%, respectively. That’s likely a couple of years away.
RBA Governor Philip Lowe said last week that conditions in Australia have “stabilized recently and the downturn has been less severe than earlier expected,” after holding the cash rate at 0.25%. The RBA may be forced to temper its optimism while authorities contain the latest outbreak.
The initial closure of swathes of the economy in March and April had a dramatic impact on consumer and business confidence, with both plummeting. Sentiment among firms has since regained ground, though Tuesday’s survey was conducted before Victoria’s shutdown. Consumer confidence Wednesday -- capturing the latest lockdown -- reversed some of its recent gains.
Australia is at a crossroads as optimism that the worst has passed gives way to rising anxiety over a second infection wave.
“What we’re seeing ties in with global trends where the labor market is only recouping some of the jobs lost during the lockdown, so there’s a long way still to go,” said RBC’s Ong. “It’s still a hard slog ahead and unfortunately the situation in Victoria suggests weakness ahead, which is already showing up in some leading indicators.”
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