SYDNEY (BLOOMBERG) - Australian unemployment unexpectedly fell in August as government and central bank stimulus helped the labour market withstand Victoria's renewed lockdown, with more than half of the jobs lost from the pandemic now recovered.
The jobless rate dropped to 6.8 per cent in August from 7.5 per cent a month earlier versus a median estimate of an increase to 7.7 per cent, data from the statistics bureau showed on Thursday (Sept 17) in Sydney. Employment surged by 111,000 in August, with all states and territories outside of Victoria gaining, and completely wrong-footing analyst estimates of 35,000 drop.
The data’s strength was surprising because the period spanned Melbourne’s shift to Stage 4 restrictions and a curfew to contain a rapidly spreading outbreak, as well as nervousness in neighboring New South Wales that it was headed down the same path. The labor market’s ability to absorb this weakness and maintain its recovery is testament to the government’s signature JobKeeper employment subsidy -that will extend into 2021 - and central bank stimulus.
Self-employed workers drove the monthly jobs increase. As part-time jobs returned at twice the pace of full-time, the ubiquitous food delivery services, with its riders pedaling the streets of Australia’s cities, are expected to be responsible for much of this rise.
“The upshot is that the unemployment rate is now unlikely to climb to 8.5 per cent over the coming months as we had anticipated, let alone the 10 per cent predicted by the RBA and the Treasury,” said Marcel Thieliant, senior economist for Australia at Capital Economics. “Indeed, with restrictions in Victoria set to be loosened toward year-end, employment should continue to rise.”
The Reserve Bank of Australia, which has kept its benchmark interest rate near zero since March, when it began buying government bonds to ensure the yield on three-year remained around 0.25 per cent, had predicted the jobless rate would climb to around 10 per cent later this year.
The central bank this month announced an expansion of its lending facility for banks and signaled that it remains open to exploring additional measures to support the economy. Gross domestic product contracted by the most on record last quarter, officially pushing Australia into its first recession in almost three decades.
Among other details in today’s jobs report:
Monthly hours worked fell by 4.8 per cent in Victoria, compared with a 1.8 per cent increase across the rest of Australia;
Under-employment rate remained at 11.2 per cent; and under-utilization decreased by 0.7 percentage point to 18 per cent;
Full-time jobs rose 36,200 and part-time roles jumped 74,800;
The participation rate gained to 64.8 per cent, compared with an estimated fall to 64.6 per cent.
Australia’s second most populous state is now beginning to ease its strict lockdown as new virus cases fall. Victoria state Premier Daniel Andrews this week relaxed restrictions for those in regional areas.
The improved economic outlook, combined with high commodity prices and US dollar weakness, has fueled a 27 per cent appreciation in the exchange rate since mid-March lows. The RBA notes that while this is line with fundamentals, a weaker currency would aid the recovery.