Last Thursday’s release of labour force data by the Australian Bureau of Statistics could nearly have been cause for national celebration – the national unemployment rate declined to 4.9% in June, a level not seen for around a decade.
But it was overwhelmed by the news Victoria would head into another lockdown, and then followed by a significant extension of restrictions in Sydney. The lockdowns, driven by the emergent COVID Delta strain, will have a notable impact on the Australian economy in the near term. And of course, for many individuals and small businesses, they can be financially and socially devastating.
But for the broader economy, the starting point was good. During June, employment increased by 29,100 nationally. Employment growth in Queensland (around +16,500) and Western Australia (around +12,500) more than offset declines in New South Wales (around -9,000) and Victoria (around -9,000) in the month.
More remarkably, the employment to population ratio for 15 to 65 year-olds continued to grow during the month, to a new record level of 75.7%, well above its pre-COVID levels.
Chart: Employment to population ratio for 15 to 65 year olds and the unemployment rate
- Source: ABS Labour Force
However, not all the news was positive, and a potential precursor for where we may be heading.
The June Labour Force Survey reference period was Sunday 30 May to Saturday 12 June, which included Victoria’s 14-day lockdown beginning 28 May. The impact of the Victorian lockdown on the national numbers can be seen in a decline in total hours worked, and an increase in the underemployment rate. Total hours worked declined 1.8% nationally, with total hours worked falling by 8.4% in Victoria.
The unemployment rate declined in Victoria to a stunning low of 4.4%, but the participation rate also declined, with some people leaving the labour force. The decline in total hours worked saw the underemployment rate increase nationally to 7.9%, with the underemployment rate in Victoria jumping more than two percentage points to 10%.
The June data, and current circumstances, suggest that the Australian labour market’s remarkable recovery is at some risk of a sudden halt. To date, we have seen relatively quick recoveries from short lockdowns, but this time we are looking at lengthier lockdowns covering bigger populations. Consumer confidence has slumped in NSW and on average around 25,000 jobs may be lost each week of the Sydney lockdown. How quickly these jobs can be recovered once restrictions are eased is not clear, with the Delta strain bringing much more uncertainty about the path forward over the coming months until vaccination rates are adequate.
That said, from a broad economic perspective, the labour force data showed us we were heading into these broader lockdowns with a significant degree of economic momentum – a far cry from the picture over 12 months ago with the initial national lockdown).
Deloitte’s recent Heads of M&A survey showed a stunning lift in activity, and business investment is picking up. The latest issue of Deloitte Access Economics’ Business Outlook provides a medium-term look at Australia’s economic recovery beyond these short-term head winds.