- Australia’s unemployment rate has jumped from 5.2% to 6.2% – less than the 8.2% figure that had been forecast.
- However, economists have warned that the headline figures conceal the true state of affairs, with nearly 500,000 people disappearing from the unemployment figure due to its methodology.
- Surging underemployment and underutilisation figures reveal the Australian labour force is not in a good way.
- Visit Business Insider Australia’s homepage for more stories.
The most-anticipated job figures in years have finally landed, and they paint a complex picture.
Yes, the ABS data shows there were huge job losses – 594,300 of them to be exact – in the month of April, as layoffs flowed from business shutdowns. And yes, the unemployment rate jumped from 5.2% to 6.2%, far better than the 8.2% that had been forecast, but the impact remains enormous.
“Words can scarcely do justice to the economic damage caused by COVID-19. Businesses ruined, jobs lost, with a speed that is quite simply without precedent,” Indeed Asia-Pacific economist Callam Pickering said in a note issued to Business Insider Australia. “
“Some of the impact will be temporary, unwinding as soon as restrictions are lifted, but make no mistake: the impact of COVID-19 will stick with us for years to come. We cannot expect the economy to return to what it was pre-crisis, at least not immediately.”
That’s because while the unemployment rate remains lower than expected, it conceals bigger goings on in Australia’s labour market.
For one, the participation rate, which indicates the proportion of Australians looking for work, has dropped to its lowest level since 2004. In other words, workers might be sent packing from their jobs but they’re not necessarily going hunting for another one, effectively meaning they drop out of consideration when the unemployment rate is calculated.
“Due to methodology, which doesn’t always sit well with reality, 489,800 people simply left the Australian labour force in April,” Pickering said. “Had the size of the labour force held steady, with everyone losing employment shifting to unemployment, then the unemployment rate would have spiked to 9.6%.”
This figure sits more in line with Treasury estimates that put unemployment peaking at 10%. So too has the government’s JobKeeper program helped artificially depress the figure, as millions of Australians are kept on by businesses receiving $1,500 wage fortnightly wage subsidies — a policy that may not last.
“The subsidy is imperfect – failing to cover vulnerable casual workers – but it has preserved the connection between business and employee. It is imperative that the policy remains in place until it is no longer needed,” Pickering said.
“Cutting or removing the subsidy prematurely could result in a second round of job losses, leaving the recovery on much weaker footing. Even tinkering with the policy could create uncertainty among businesses and workers, hampering consumer and business confidence.”
Yet another reason may be that those who had been job hunting have given up as hundreds of thousands of Australians now compete for the little that is on offer.
A Seek job report released on Thursday and provided to Business Insider Australia shows the number of advertised jobs continues to drop, falling nearly 50% over the last month. It means there’s 65% less job ads than this time last year, with New South Wales and Victoria the hardest-hit states.
A more accurate portrayal might then be found in the underemployment rate – the percentage of Australians wanting more work – at 13.7%, and the underutilisation rate – combining unemployment, underemployment, active and inactive job seekers – at nearly 20%.
“The headlines in the April employment data disguises the hit to consumer incomes,” AMP Capital senior economist Diana Mousina said. “While there has only been a small rise in the unemployment rate, hours worked plunged by 8% in April and labour market spare capacity – as measured by labour underutilisation – rose to 19.9%, from 14.1% last month.”
“So there will still be a large economic hit to consumer spending and the housing market from lower consumer incomes,” she said.
Whatever the many reasons keeping unemployment at bay, it looks like some of the factors hiding the true state of affairs will begin to dissipate in the months ahead.
“Australia’s labour market data will deteriorate further in May. Some of the people who have left the labour force will re-enter once they begin searching for a new job. Others who haven’t been working – but believe they still have a job – may also shift to unemployment if businesses remain shut,” Pickering said.
In which case, a double-digit unemployment rate is still firmly on the table.