(Bloomberg) — Australian unemployment unexpectedly fell as fiscal and monetary stimulus helped the labor 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% in August from 7.5% a month earlier versus a median estimate of an increase to 7.7%, data from the statistics bureau showed Thursday 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% over the coming months as we had anticipated, let alone the 10% 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%, had predicted the jobless rate would climb to around 10% later this year.
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“Despite interstate border closures, several states have seen employment, and more importantly hours worked, return to pre-covid levels. The splintering of Australia’s economy into virus-affected and virus-free zones is likely to persist in September, and potentially October depending on the pace at which restrictions are unwound.”
James McIntyre, economist
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% in Victoria, compared with a 1.8% increase across the rest of AustraliaUnder-employment rate remained at 11.2%; and under-utilization decreased by 0.7 percentage point to 18%;Full-time jobs rose 36,200 and part-time roles jumped 74,800The participation rate gained to 64.8%, compared with an estimated fall to 64.6%
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 U.S. dollar weakness, has fueled a 27% 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.
(Updates with comments from Bloomberg Economics.)
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