Australian employment fell by its most since the onset of the pandemic as 146.3k jobs were lost in August with much of the nation in lockdown. Hours worked declined significantly (-3.7%m/m) as activity was disrupted and Australians stayed at home. Participation in the labour force has fallen sharply since the middle of the year and has collapsed in New South Wales to be around the depths seen in 2020.
Labour Force Survey — August | By the numbers
- Employment (on net) fell by 146.3k in August, larger than the median estimate of -80k. July's initially reported 2.2k increase was revised up to 3.1k.
- The measured unemployment rate moved down by 0.1ppt to 4.5% vs 5.0% expected — an outcome to be ignored in the circumstances given it was driven by people exiting the labour force. Significant rises in rates of underemployment +1ppt to 9.3% and underutilisation +0.9ppt to 13.8% provide a more accurate reflection of conditions.
- Labour force participation declined from 66.0% to 65.2% — a 10-month low. Participation in NSW fell 2.5ppts to 62.4% to be around the level seen during the national lockdown.
- Hours worked nationally fell by 3.7% in August following a 0.2% decline in July. Since the onset of Delta, hours worked across the economy are down 3.9% — a severe change in conditions from the strong momentum seen in the previous quarter (2.9%).
Labour Force Survey — August | The details
The spread of the Delta variant and associated lockdowns across Sydney, Melbourne, Brisbane and the ACT saw a severe deterioration in conditions in the labour market in August. Employment fell by its most since the 2020 national lockdown, down 146.3k for the month but was still just above its pre-pandemic level. This was driven by a 172.8k fall in New South Wales as the Sydney lockdown was extended; employment in the state has now contracted by around 210k since the Delta onset. Queensland posted a 29.8k fall in employment associated with the lockdown in the state's south-east corner. Victoria surprised with employment lifting by 29.1k, though that could easily unwind next month.
Both the part-time and full-time segments saw their sharpest falls since the national lockdown. As was the case then, the loss of employment was more severe in the part-time segment (-78.2k) than in full-time (-68.0k) in August.
Overall, part-time employment has slid to 1.5% below its pre-pandemic level but in stark contrast full-time work is 1.0% higher over the period, highlighting the larger effects of lockdowns on the former.
Hours worked were crunched by 3.7% in the month, to be down by 2.9% on its pre-pandemic level. Tighter restrictions in Sydney led to hours worked in New South Wales falling by a further 6.5%m/m after a 7.0%m/m fall in July. As the chart below shows, the hit to hours worked in New South Wales through the Delta period has exceeded the disruptions at the onset of Covid. With Victoria returning to lockdown, hours worked there fell by 3.4%m/m and reversed much of the reopening burst seen in July. Hours worked across the rest of the nation fell by 1.9% in the month, weighed by lockdowns affecting Queensland (-5.3%m/m) and the ACT (-2.5%m/m).
The disruptions of the lockdowns and the structure of fiscal supports — with payments going from the government to workers directly rather than through firms' payrolls — drove a steep fall in participation, from 66.0% to 65.2%. Meanwhile, the hit to jobs saw the employment to population ratio rolling over to its weakest level since early in the year.
Participation in New South Wales has collapsed over the past couple of months and at 62.4% is around the depths it reached during the national lockdown last year.
With the size of the labour force (-168.1k) falling by more than employment (-146.3k), the measured unemployment rate eased from 4.6% to 4.5%. Clearly, that is not an accurate reflection of conditions. The rise in underemployment (9.3%) and underutilisation (13.8%) since the middle of the year speak to the disruption that has occurred in the labour market and the loss of hours due to lockdowns.
Labour Force Survey — August | Insights
The strong momentum that had built up in the Australian labour market was turned upside down since the rise of the Delta variant during the middle of the year. Best reflecting the impacts on the economy, hours worked are down by 3.9% since June, suggesting that market forecasts for a contraction in Q3 GDP of more than 3% are reasonable. Participation is down by around 1ppt from its recent peak, with many people classified as having exited the labour force. While the current fiscal supports do not maintain any formal employee/employer link as was the case in JobKeeper, labour shortages pre-Delta could mean that many businesses are holding onto staff through this period to enable a quick return to work once the lockdowns end.