Australia's unemployment rate has fallen to a 10.5-year low of 4.9% just 11 months after it had hit a near 22-year high shortly after the onset of the pandemic. Employment continued to rise further above its pre-pandemic level, lifting by 29.1k in June to follow on from the very strong increase in May of 115.2k. However, hours worked fell sharply in the month reflecting the impact of the snap two-week lockdown in Victoria.
Labour Force Survey — June | By the numbers
- Employment (on net) came in above the consensus estimate rising by 29.1k in June vs 20.0k expected. This added to the 115.2k surge in May.
- Australian unemployment is now at its lowest level since December 2010 after falling from 5.1% to 4.9% (vs 5.1% expected).
- Labour force participation maintained its level from the month prior coming in at 66.2%. Meanwhile, the employment to population ratio lifted to a record high at 63.0%.
- Hours worked declined sharply with a 1.8% fall in June (6.8%yr), driven mainly by the impact of Victoria's recent lockdown as hours worked in the state plunged by 8.4%m/m.
Labour Force Survey — June | The details
On the back of May's very strong rise in employment (115.2k), a further gain of 29.1k came through in June to outperform the consensus expectation (20.0k). This has elevated total employment to 1.2% above its pre-pandemic level.
For the third consecutive month, it was full-time work leading employment higher. Full-time employment lifted by 51.6k as part-time employment fell by 22.5k. The patchiness in part-time work of late reflects weakness around the Easter holiday period and the impact from the Victorian lockdown. Full-time employment is now 1.7% higher than its pre-pandemic level, while part-time employment (0.2%) is broadly in line with where it was in March 2020.
Hours worked continued on their volatile path. Back in April hours worked declined by 0.7% as many Australians took leave around the Easter period before rebounding by 1.4% in May. Then in June, a snap lockdown in Victoria led to hours worked nationally falling by 1.8%, decelerating annual growth to 6.8% from 13.0%. In the month, both full-time (-1.6%) and part-time hours (-3.0%) declined.
This next chart highlights the impact that the Victorian lockdown had on hours worked nationally. Hours worked in Victoria plunged by 8.4% in June, which was the sharpest month-on-month fall seen in the state since the introduction of last year's national lockdown. Notwithstanding a 1.1% fall in hours worked in Queensland, if we exclude the impact of Victoria's lockdown, hours worked across the other 5 states lifted by 0.5% on the month prior. Going forward, hours worked will snapback in Victoria with the state reopening, but in New South Wales hours worked are set for a sizeable fall due to the lockdown in Sydney, which is now approaching its 4th week.
The combination of rising employment and falling hours worked had varying effects on the measures of labour market spare capacity. With the participation rate holding steady at 66.2%, the growth in the labour force (7.1k) was comfortably outpaced by the rise in employment (29.1k). This drove the heads-based unemployment rate down from 5.1% to its lowest level in 10.5 years at 4.9%. But the loss of hours worked in the economy meant that rates of both underemployment (+0.5ppt to 7.9%) and underutilisation (+0.3ppt to 12.8%) backed up in the month. As alluded to above, the impact of the Sydney lockdown could well prompt further rises to these measures at the national level in July.
Coming back to the states, the chart below shows the profiles for employment growth. Queensland came out on top in June (16.7k), with the state also outperforming in Q2 (41.7k) and over the past year (235.2k). Employment in New South Wales contracted in June (-9.2k) after a very strong rise in May (75.2k) and was only second to Queensland over the past year. While employment fell in Victoria (-9.2k), as has been the case throughout the pandemic period, the lockdown impact was much more severe on hours worked. Participation in Victoria was also driven sharply lower by the lockdown (-0.4ppt to 66.1%), which saw unemployment there decline (-0.3ppt to 4.4%) despite the fall in employment. Both Western Australia (12.6k) and Tasmania (2.6k) saw employment rise in June, but South Australia recorded a 4.5k fall.
Labour Force Survey — June | Insights
The further rise in employment is an encouraging signal considering the strength of the increase in May, broadly remaining consistent with the very high levels on the indicators of labour demand. However, the impact of the Sydney lockdown has significantly increased uncertainty over the near-term outlook. It is probably best to wait and see how the situation plays out in Sydney for a little longer before drawing any firm conclusions. For now, a national unemployment rate with a 4 in front of it is the key takeaway.
