As it stands | Labour Force Survey
Ahead of the COVID-19 crisis, the Australian labour market was in reasonable shape. Employment outperformed the consensus estimate for the fourth straight month with a 26.7k advance in February and employment growth was robust at around a 2.0% annual pace. The unemployment rate reversed its rise from the month prior declining from 5.3% to 5.1%, though it was still well above the RBA's estimate of full employment (around 4.5%) and spare capacity in the labour market was historically elevated with the underutilisation rate at 13.7% and the underemployment rate at 8.6%. This, in part, continued to reflect a near-record high level of participation in the workforce at 66.0%. Hours worked softened for the second straight month, with the aggregate level declining by 0.2% in February, which slowed annual growth from 0.9% to 0.5%. For a complete review of February's report see here.
By way of background, the ABS's Labour Force Survey in effect reflects conditions over the first two weeks of each month, which in this case was before the more stringent tightening of social distancing measures occurred, most notably the closure of cafes and restaurants, licensed premises and sporting venues that then had spillover impacts across the retail sector. This was also ahead of the government's $130bn wage subsidy policy announcement. It is likely that firms in these industries had already started to cut employees' hours and or stand down staff ahead of the government-mandated announcement. Given the lack of visibility over the situation, economists' expectations for today's report vary widely. The median call is for employment to fall by 30.0k, though individual estimates are as pessimistic as a -125.0k collapse on the low side to a -15.0k decline on the high side. The consensus view is for the unemployment rate to rise to 5.4% from 5.1%, between a range of estimates from 5.0% to 5.9%. Where that lands will depend greatly on what occurred to the participation rate; while notoriously difficult to predict, the median estimate looks for a 0.1ppt decline to 65.9%.
Away from the headline employment outcome, there are two areas to acknowledge. Firstly, it is important to understand that the unemployment rate will likely be artificially low in this report given the timing issue discussed above and also how a respondent's absence from work will be classified. A worker will still be classified as employed even if they have been on a period of unpaid leave of up to 4 weeks so long as they believe they will have a job to return to. If that is not the case, the worker will need to have commenced searching for and be available to work to be included as being within the labour force. Secondly, because of these issues, the ABS has indicated that the clearest sign of disruption to the labour force from the COVID-19 crisis is likely to come from the hours worked data. Recently the ABS commenced profiling the reasons for employees working fewer hours than usual (see here). Those insights for March are due to be published by the Bureau on the 23 April.
