Despite a deterioration in conditions in Victoria associated with the reversal of the state's reopening, the broader Australian labour market continued its post-shutdown recovery in August as employment surprised with a rise of 111k against the median forecast for a decline of 35k. Meanwhile, the upward trend in the unemployment rate reversed falling sharply to 6.8% from 7.5%.
Labour Force Survey — August | By the numbers- Employment (on net) increased by 111k (seasonally adjusted) in August coming in completely against expectations for -35k on the median estimate (range: -125k to +75k). July's initially reported increase of 114.7k was revised up to 119.2k.
- Headline unemployment fell from 7.45% to 6.83%, whereas it had been expected to lift further to 7.7%. Australia's unemployment rate was 5.2% before the pandemic emerged. Underemployment eased by 0.07ppt to 11.16% and underutilisation moved down to 17.98% from 18.71%.
- The participation rate lifted a touch (+0.1ppt) to 64.8%, with Victoria's shutdown contributing towards preventing a larger increase.
- Aggregate hours worked were essentially flat in August (0.1%) at 1.683bn hours (-5.1%yr) as a sharp fall in Victoria (-4.8%m/m) offset gains in the other states.
Labour Force Survey — August | The details
In a complicated report today, the good news was that the recovery in employment was not halted by the reversal of Victoria's reopening, as had been feared and seemingly indicated by the high frequency payrolls data. August's lift in employment of 111k followed on from the gains in June (227.8k) and July (119.2k) as the domestic economy reopened. In total, more than half (53%) of the 871.6k jobs that were lost during the shutdown have been recovered, with 458k jobs being regained over the past 3 months. Part-time employment was most impacted initially and has led this recovery (407k) as full-time work has been much slower to pick up (51.0k).
In August, the 111k gain in employment was split between a 36.2k rise in full-time work and a 74.8k lift in the part-time segment. Confirming that there is yet a long way to go, as things stand now, the level of full-time employment is around 287k lower than in March before the pandemic hit, while part-time work is down by 126.7k over the period.
Despite more Australians coming back to work in August, hours worked were virtually flat in the month (0.1%) after gains of 4.2% in July and 1.3% in June, as the shutdown in Victoria (-4.8%) offset increases across the other states; NSW +0.7%, QLD +2.4%, SA +1.8%, WA +3.8% and TAS +4.3%. Overall, total hours worked are still down by 5.4% on their pre-pandemic level in March, but this is from a trough of -10.4% in May.
The impact of the Victorian shutdown, as well as a surprise fall in Queensland, contributed to a stalling of the recovery in workforce participation (+0.1ppt to 64.7%), which is still around 1ppt down from where it was pre-pandemic. Meanwhile, the employment to population ratio continues to improve (+0.5ppt to 60.3%) having recovered half of its shutdown-induced collapse.
With many more Australians yet to come back to the labor force and with Victoria yet to reopen for the second time, spare capacity will remain a significant issue for policymakers in this labour market for a while to come.
The key details for the states are summarised below. Clearly, conditions in Victoria were always going to deteriorate due to the shutdown being reinstated, though the fall in employment (-42.4k) and the associated rise in the unemployment rate (+0.36ppt to 7.1%) were much more modest reactions than it experienced during the nationwide shutdown.
Labour Force Survey — August | Insights
The overall theme from today's report was one of divergence; conditions in Victoria deteriorating, but not a severely as before, while the recovery across the rest of the nation moved ahead. However, the impact of the disruption in Victoria from shutdown 2 on the broader economic recovery was best reflected by the stalling in hours worked in August.