Employment falls sharply, but a sharp rebound is in train as NSW, VIC and ACT re-open

Australia’s unemployment rate rose 0.1% over September to 4.6%, the Australian Bureau of Statistics said.

The nation lost 138,000 jobs over the month reflecting the labour market damage inflicted by lockdowns across New South Wales and Victoria.

However, the topline unemployment rate does not tell the full story of Australia’s labour market, with workforce participation falling

Victoria drove this month’s decline with employment falling 123,000, reflecting the brunt of the lockdown impact given the lockdown.

Despite the large employment decline, unemployment only rose 0.1% to 4.6% with the participation rate falling a sharp 0.7 points to 64.5%.

An alternative measure of unemployment that captures the fall in participation and those working zero-hours rose more sharply and currently sits at 7.8%, highlighting the impact of the lockdowns on the labour market.

Fewer Australians formally listed as unemployed means the overall unemployment rate doesn’t tell the full story, said ABS head of labour statistics Bjorn Jarvis.

“The low national unemployment rate continues to reflect reduced participation during the recent lockdowns, rather than strong labour market conditions,” Jarvis said.

In many respects, this recent ABS data is in the rear vision mirror given NSW embarked on its first stage of re-opening on Monday and the ACT and VIC are set to follow.

Businesses are expecting a sharp rebound in activity with job advertising in NSW lifting 20.6% in September ahead of re-opening according to SEEK.

Business confidence also rose sharply in September in the NAB Business Survey, while consumers themselves expect a sharp rebound with unemployment expectations falling to pre-lockdown May 2021 levels in yesterday’s W-MI Consumer Survey.

The unemployment rate is also likely to move higher as people return to the labour force and as search for work requirements for those receiving unemployment benefits is re-instated in former lockdown areas, but importantly unemployment should quickly resume its downward trend and NAB forecasts the unemployment rate to fall to 4.4% by the end of 2022.

Hours worked, which is a better indicator of the reduction in labour market activity in lockdown periods, actually rose in the quarter but remained 6.4% below their recent peak in May 2021 ahead of the renewed spate of lockdowns.

Source of charts and commentary: NAB

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About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.