Australia Jobs Highlight Pain Australia Jobs Highlight Pain Australia Jobs Highlight Pain

Australia Jobs Highlight Pain

Summary:  In the Aussie session, it was all about the labour market data for May which has continued the deterioration from April. The labour market data reveals the jobs market weakened further in May and highlights the devastating impact of the pandemic that has seen jobs across the globe shed at a frightening pace. Despite the ASX 200 closing in on 6,000 once again, the reality on the ground remains painful for many who have suffered the impact of COVID-19 on the labour market and the economy.


The May jobs report was weaker than economist’s forecast and the headline unemployment rate came in higher than expected at 7.1% vs. 6.9% expected. Unemployment is now at the highest level in 18 years as the economy shed 227,000 jobs over the last month. A key concern being that the continued large-scale job losses into May are not contained to the sectors that bore the brunt of lockdowns like hospitality, tourism and retail so potentially signal more permanent white collar job losses.

The participation rate, which refers to the size of the workforce as percentage of the working-age population fell to 62.9%, a 20-year low and level last seen in 2001, so has again cushioned the headline unemployment rate as those individuals dropped out of the labour force all together. Without the fall in participation, the headline unemployment rate would be more than 11%.

Bjorn Jarvis, head of labour statistics at the ABS notes, “A combined group of around 2.3 million people -- around 1 in 5 employed people -- were affected by either job loss between April and May or had less hours than usual for economic reasons in May,”.

As we have previously noted, the JobKeeper subsidy continues to artificially supress the headline unemployment rate. The ABS has said “people who are paid through the JobKeeper scheme will be classified as employed, regardless of the hours they work (e.g. even if they are stood down).” Prior to COVID-19 a member of the workforce had to work at least one hour to be considered employed. That is why we look to hours worked and underemployment in order to gauge the real impact of COVID-19 on the Australian labour market.

Hours worked plunged by 0.7% in May, and with April’s plunge of 9.5% are down 10.2% since March, underscoring the impact on consumer incomes. The underemployment rate (which refers the number of people who are employed but who want to work more hours) fell to 13.1%. Underutilisation, another measure of labour market slack, (which refers to people who are either unemployed or looking for more hours of work) rose to 20.2%.

Although the “lucky country” has escaped the worst of the health crisis relative to other countries and is now on the path to opening, the data show that the impact on the labour market has been no less severe and the economy will continue to suffer the fallout. The weekly payrolls data has confirmed that the worst for the labour market may be in the rear view as the economy continues to reopen and infections rates remain low. Although we can draw some comfort in the fact the labour market is heading in the right direction, the May data highlights the road to recovery is long and winding with many bumps along the way. A shift in consumer behaviour towards a reduced propensity to consume and increased savings which will hamper, both the speed and trajectory of the economic recovery will only be accelerated by ongoing labour market dislocations. Job insecurities and reduced hours weigh on the consumer’s marginal propensity to spend, particularly if health concerns remain, which sets in motion a vicious cycle with respect to weaker demand feeding through to reduced business revenues. This whilst businesses continue to suffer the effects of prolonged social distancing measures even as lockdowns are lifted, the combination in turn leads to more job losses. With this is mind a continued focus on fiscal stimulus will be needed. To date the measures can be viewed as a bridge to normalcy, but the rebuild and subsequent recovery will require continued targeted measures to assist the full return in economic activity and creation of jobs. For the government, the focus should turn to the rebuild, not budget repair and winding back stimulus measures. With COVID-19 as a catalyst for doubling down on revitalisation.

Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.