Australian employment -594.3k in April; Unemployment rate 6.2%

Australian employment posted its largest decline on record as almost 600k jobs fell victim to the COVID-19 crisis in April. The nation's unemployment rate lifted to 6.2% (from 5.2%), though a much larger rise was avoided due to a very significant decline in the level of participation in the workforce. The measures better reflecting the impact posted their worst outcomes on record as the underutilisation rate hit 19.9% and hours worked declined by 9.2% in the month.   

Labour Force Survey — April | By the numbers

• Net employment fell by 594.3k (seasonally adjusted) in Apil vs -575.0k expected.

• National unemployment lifted to 6.2% from 5.2% (vs 8.2% expected)
• Underutilisation increased from 14.1% to 19.9% and underemployment lifted from 8.8% to 13.7%, with both at record highs.  

• Participation fell sharply from 66.0% to 63.5% — its lowest since late 2004. 

• Aggregate hours worked collapsed by 9.2% in the month, as annual growth fell from 0.7% to -8.0%.

Labour Force Survey — April | The details

April was a historic month for all the wrong reasons as the severity of the impact on the labour market became more clear. The table, below, highlights the tremendous flow of workers out of the labour force (-489.8k), which reflects the easing in job search requirements relating to the JobSeeker payment, the effective closure of large sections of the economy and adherence to social distancing. Clearly, in the midst of a pandemic, many judged job search activity as either impossible or unsafe. That meant the rise in unemployment was restricted to 1 percentage point, as the number of unemployed increased by 104.5k.  

To better understand the impact, underemployment (measuring workers who would like to work more hours) surged from 8.8% to 13.7% and underutilisation (counting the unemployed and underemployed) increased from 14.1% to 19.9%. Keep in mind these measures were already elevated before the pandemic. 

The full breakdown of unemployment, underemployment and underutilisation rates are summarised in the table below. While all segments increased significantly in the month, unemployment lifted the most for those aged 15-24 years (+2.23ppt) followed by a 1.57ppt rise for 25-34 years. For underemployment and underutilisation, the increase was highest for 25-34 years at +6.75ppt and +8.32ppt respectively, indicative of a significant downward adjustment to hours worked.

Aggregate hours worked fell by 9.2% in April as firms responded to weaker demand by adjusting work schedules. It is also reasonable to think that some workers may have voluntarily pulled back to protect their health, particularly in higher risk activities. In annual terms the decline of 8.0% is the worst on record and nearly twice the pace of contraction than in the previous two recessions. 

Labour Force Survey — April | Insights

The deterioration in labour market conditions was not unexpected nor surprising as it reflects adherence to the public health advice to limit the spread of COVID-19. The unfortunate result is the hardship of unemployment and underemployment. The good news is that attempts to manage the virus have (to date) gone better than the public health authorities had expected, leading to restrictions being eased quicker and more widely. Yesterday's surge in consumer sentiment in the Westpac-Melbourne Institute survey in May is a testament to that. Importantly, though, the re-opening of the economy will not be able to occur in a synchronised fashion, which argues for fiscal support to be continued in a targeted manner. It is equally important to avoid having to re-impose restrictions as that would come at an enormous cost to the economy in terms of jobs and incomes.