Australia's June labour force update is due to come through at 11:30am (AEST) today. It will follow a remarkably strong set of outcomes in May where employment surged by 115.2k and the unemployment rate fell from 5.5% to 5.1% to be back at pre-pandemic levels. While forward-looking indicators continue to support a positive outlook, the resilience of the recovery in the labour market is set to be tested by the return to lockdowns across several capital cities following recent virus outbreaks.
As it stands | Labour Force Survey
Employment in May printed at 115.2k — an outcome that was sharply higher than the consensus forecast (30.0k) and the top end of the range of estimates (45.0k) going into the report. It also gave further credibility to initial assessments that the 30.7k fall in employment in April was driven by seasonality around the Easter holiday period rather than the roll-off of the JobKeeper wage subsidy.
May's employment surge was led by a 97.5k increase in full-time employment as part-time employment lifted by 17.7k, with the latter segment only partially rebounding from a 64.2k fall in April. All up, this brought employment to 13.125 million to stand 1.0% above its pre-pandemic level.
The strength of May's employment outcome drove a significant decline in the unemployment rate from 5.5% to 5.1%, taking it back to the level that prevailed in Australia in February 2020. This came alongside a rebound in the labour force participation rate to 66.2% after it had slipped to 65.9% in April associated with the Easter holiday period. Broader measures of spare capacity continued to fall — underemployment down from 7.8% to 7.4% and underutilisation lowering from 13.3% to 12.5% — and are at levels last seen around 8 years ago.
A return to more normal patterns of work saw hours worked rebounding sharply by 1.4% in May after a 0.7% fall in the month prior. Annual growth in hours worked firmed from 12.3% to 13.0%, with the base period going back to last year's national lockdown. Compared to their pre-pandemic levels, hours worked (2.9%) have seen a sharper recovery than employment (1.0%).
Market expectations | Labour Force Survey
Consensus is set on employment slowing back to a 20.0k rise for June, though as has been the case throughout the pandemic period the band of estimates is again wide, ranging from -25.0k to 45.0k. Likely inducing volatility into today's report will be Melbourne's recent two-week lockdown that was in effect for much of the survey period. The ABS's high-frequency payrolls data clearly shows the impact on Victorian payrolls relative to the other states. National unemployment is forecast to remain at 5.1% — estimates are spread between 4.9% and 5.2% — based on the participation rate holding at 66.2%.
What to watch | Labour Force Survey
The main question to be answered today is whether the labour market was able to build on May's successes amid the disruptions from the two-week lockdown in Melbourne. Insights from previous lockdowns indicate that the impact will be most evident in the change in hours worked. There could be a more noticeable impact on employment in the July report due to the more protracted lockdown occurring in Sydney, though the income and business cash flow support measures announced by the Federal Government earlier this week have attenuated some of that risk.
