Job data not all good

The latest release of official Australian unemployment figures shows a good rise in full time employment but the number of paid hours worked has fallen

18 February 2021 | Staff Writers

The Australian Bureau of Statistics (ABS) has released jobs data for the first month of 2021, seasonally adjusted employment increased by 29,000 people between December 2020 and January 2021.

According to ABS labour statistician Bjorn Jarvis, the data signals Australia’s labour market recovery continues. “January 2021 was the fourth consecutive monthly rise in employment, as employment in Victoria continued to recover. Nationally, employment was only 59,000 people lower than March 2020, having fallen by 872,000 people early in the pandemic,” he says.

The numbers are in line with financial market expectations, AMP Senior Economists Diana Mousina says the result is “below the average growth in jobs over recent months but is still decent.”

Close to 93% of jobs lost due to COVID-19 at the height of the national lockdown in April and May 2020  have been regained, an impressive rebound compared to some major economies. Says Mousina, “Only around 56% of US jobs have been recouped which shows that Australian fiscal policy has worked to keep people employed (JobKeeper) along with good management of the virus which helps to keep mobility higher than otherwise which lifts economic activity.

“The recovery in the Australian labour market has also progressed much quicker compared to other recessions (see the first chart on the left below) – normally it takes a few years for employment to get back to its pre-recession levels.”

End of JobKeeper will test economy

Full-time jobs rose by 59,000 in January while part-time jobs fell by 29,800. The unemployment rate dropped to 6.4%, from 6.6%, but this reflected a fall in the participation rate to 66.1%. On a historic comparison basis participation is not low, in fact it is higher than pre-COVID levels.  

However, says Mousina, “The unemployment rate still has some way to get back to its pre-pandemic level of around five percent. We expect jobs growth to be positive from here as the economy ‘normalises’ but employment growth is likely to be slow, especially after the end of the JobKeeper scheme.”

Modest jobs growth is being predicted for the remainder of the year, with AMP Capital expecting unemployment to hover around its present level until 2022. This excess labour market capacity it unlikely to put pressure on wage growth, which points to subdued consumer spending for the remainder of the year.

Actual hours worked well below pre-COVID levels

Whilst many market commentators agree the JobKeeper subsidy needs to end, it will prove a test for the economy as some small businesses might close and JobKeeper recipients who were spending their payments will no longer be able to fuel consumer spending.

According to Mousina, “There are still around 103,000 people who are working zero hours because there is no work, not enough work or they have been stood down. Slightly above levels compared to a year ago which shows the lingering impacts of the pandemic. There is a good chance that these people are being supported by the JobKeeper scheme which expires at the end of March.”

While many people are back at work a number have seen their hours dramatically cut across the economy there were 100 million fewer hours worked last month than in January 2020.