Preview: Labour Force Survey - August

The latest update on the Australian labour market for the month of August is due to be published by the ABS this morning at 11:30am (AEST). A rebound in the labour market was underway following the reopening of the domestic economy in mid May, though that progress was halted by the emergence of the virus outbreak in Victoria that led to that state being shut down for a second time and this set back appears to have reverberated across the rest of the nation as indicated by a stalling in the high frequency data.   

As it stands | Labour Force Survey

The recovery in the labour market continued into July as a further 114.7k jobs were restored to the economy following the initial rebound in employment of 228.4k that came through in June as the national shutdown was eased. Through the first two months of the reopening, 343.1k (or 39%) of the 871.5k job losses that occurred over April and May had been recovered. Whereas in June the recovery came entirely in part-time employment (252.0k) as full-time work declined further (-23.6k), July saw gains across both segments with part-time up by 71.2k and full-time lifting by 43.5k.

Following on from a 4.2% rebound in June, hours worked lifted by a further 1.3% in July. Compared with their pre-pandemic level in March, this has moderated the decline in hours worked from -10.4% at the trough in May to -5.5% by July.

Workforce participation continues to recover having risen by 2ppts over June and July to 64.7%, but there is still a long way to go as it entered the pandemic at close to its highest level on record at around 66%. As more Australians return to the labour market, the unemployment rate has continued to rise and in July it had crept up to 7.5%, which is it highest level since late 1998. The improvement in hours worked has been able to moderate the rates of underemployment (11.2%) and underutilisation (18.7%) but these are still extremely elevated levels. 

A full review of July's report is available here

Market expectations | Labour Force Survey

The recovery in the labour market is expected to take a set back in August in response to the reversal of the reopening in Victoria as metro Melbourne entered a stage 4 lockdown and regional areas were placed on stage 3 restrictions early last month. The latest high frequency ABS payrolls data (see chart below) highlighted the scale of deterioration that occurred in the Victorian labour market as the state shut down again, while the recovery in employment across the rest of the nation stalled over the second half of July into early August, before picking up again towards the end of the month.     

Factoring in these developments, the median estimate according to Bloomberg is for employment to fall by 35k in August between a range of forecasts from -125k to +75k. Meanwhile, the unemployment rate is expected to tick higher again to 7.7% (currently 7.5%) with estimates spread between 7.4% to 8.0%.  

What to watch | Labour Force Survey

Given the virus outbreak that led to the reinstatement of containment measures in Victoria, today's report will show the extent of the deterioration that occurred in the state's labour market. During the national shutdown, 198.1k jobs were lost in the Victorian economy with only 52.4k (26%) of these jobs coming back over June and July, which was the softest return (in %age terms) recorded across all the states during the initial phase of the reopening. At the national level, the hours worked measure will again provide the clearest indication of the impact of these effects on underlying activity in the domestic economy.