As it stands | Labour Force Survey
Employment contracted by a much worse than expected 227.7k in May (consensus was -78.8k) following on from the shocking outcome in April where employment fell by 607.4k.
Taking into account the 3.1k decline in March, total employment in Australia fell to 12.154m in May to be at its lowest level since March 2017.
The unemployment rate lifted above consensus (6.9%) rising from 6.4% to 7.1% to its highest level since late 2001. However, it is key to highlight that the rate of workforce participation has plunged from record high levels of around 66% pre-pandemic to just 62.9% in May — its lowest since November 2000 — and this has prevented a much larger rise being reported in the official unemployment rate.
More accurately reflecting the dislocations that have occurred, the underemployment rate (counting those employed but working fewer hours than desired) now stands at 13.1% (down from 13.8% in April) and the underutilisation rate (aggregating the unemployment and underemployment rates) is at a record high of 20.2%.
Total hours worked in May came in at around 1.61bn hours to be down by 0.7% from the month prior and 9.0% lower through the year. The ABS estimates that between April and May some 1.55 million people (around 12% of the labour force) either had working hours reduced or worked no hours at all due to 'economic reasons', either as a result of being stood down or through there being insufficient work available to fulfill their usual allocation. Overall, the key message is that the rise in the unemployment rate vastly understates the impact the pandemic has had on the nation's labour market (see chart, below).
Market expectations | Labour Force SurveyThere is a high degree of uncertainty over the potential outcome of today's report. The consensus call is for a rebound of 102k on the employment number in June following the reopening of the economy that started to occur over May and the ABS's high frequency data that suggests total employment on payrolls has advanced over the period captured by today's report. The band of individual estimates on the employment outcome ranges from -30k to +170k showing there is little conviction. The unemployment rate is expected to tick higher to 7.2% from 7.1%, while workforce participation is expected to pick up to 63.4% from 62.9% as more people were called back to work or were required to start looking for work with the mutual obligation requirements under the JobSeeker support payment returning in some capacity through June.
In terms of the labour market, the initial phase of the pandemic was around assessing the scale and severity of the dislocation that occurred through job losses and disruptions to hours worked. This next phase is now about ascertaining the extent to which the reopening of the economy can restore some of the jobs that were lost through the shutdown, particularly with the government's fiscal supports in their current forms approaching their end dates. All this makes the headline employment number of key interest today.