Australia Jobs Highlight Pain

Australia Jobs Highlight Pain

Equities

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.

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.