Lockdowns turn jobs data into a mini-series

Labour force; Average Weekly Earnings

What happened? Employment rose by 2,200 jobs in July after rising by 29,100 jobs in June. Full-time jobs fell by 4,200 and part-time jobs rose by 6,400. Hours worked fell by 0.2 per cent. Hours worked in NSW fell by 7.0 per cent while hours worked in Victoria rose by 9.7 per cent. The national unemployment rate fell from 4.9 per cent to a 12½-year low of 4.6 per cent in July.

Other data: In seasonally adjusted terms, average weekly ordinary time earnings (AWOTE) was $1,737.10 in May 2021, up by 1.4 per cent on a year ago. The average annual wage is $90,329.

Implications: The latest jobs data is somewhat of an anti-climax. The full impact of lockdowns across the country will show up in August, September and possibly October data. So today’s figures have no immediate implications for policymakers or financial markets.

The monthly jobs data is pivotal for determining monetary policy settings. If more people have work, this can translate to more spending, influencing retail conditions. The wage data is important for consumer-focussed industries including retailers.

What does it mean?

• If you thought the July jobs data would show the full impact of lockdowns across Australia, you will be disappointed. The methodology and surveying timeframes used by the Australian Bureau of Statistics (ABS) mean that the impact of lockdowns on the job data needs to be viewed over a few months to gauge the full impact. And government support payments for business and consumers also have roles in crafting the job market outcomes.

• When releasing the June jobs data a month ago the ABS noted “Hours worked data continues to provide the best indicator of the extent of labour market impacts from lockdowns.” Lockdowns mean that some people can’t work (especially retail and other services) and that shows up in reduced hours worked. Of course, some people can work (such as office workers) but they work remotely – and perhaps work longer hours. But government assistance payments are important in helping people hold on to their jobs.

• And that’s what happened in July. With Sydney beginning a lockdown and Melbourne emerging from its ‘mini-lockdown’ during the survey period, hours worked fell 7 per cent in NSW but rose 9.4 per cent in Victoria. The participation rate in NSW fell from 65.9 per cent to 64.9 per cent. Unemployment in NSW fell by 27,000 and the jobless rate fell from 5.1 per cent to 4.5 per cent.

• While intuitively people may view the fall in the national and NSW jobless rates as positive developments, the ABS struck a note of caution reflecting over lockdowns in Victoria and NSW, noting the falls in unemployed persons.

• The ABS said: “In each of these instances, the unemployment rate also fell. Falls in unemployment and the unemployment rate may be counter-intuitive, given they have coincided with falls in employment and hours, but reflect the limited ability for people to actively look for work and be available for work during lockdowns. This means that people are falling out of the labour force.”

• And the ABS further noted: “Around 61.5 per cent of the fall in unemployment over June and July is explained by these falls in New South Wales and Victoria. The fall in the national unemployment rate in July should not necessarily be viewed as a sign of strengthening in the labour market – it’s another indication of the extent of reduced capacity for people to be active in the labour market, in the states with the largest populations.”

• Overall CBA group economists expect that the economy will contract 2.7 per cent in September quarter before lifting 1.9 per cent in the December quarter. The jobless rate may lift to 5.6 per cent in October. The economy may not roar back like it did in 2020 because suppression of the Delta variant is harder, requiring longer or more frequent lockdowns. The take-up of vaccination is the other curve ball that will deterine the speed and tining of the recovery. But on the assumption that the economy re-opens in coming months and vaccination rates remain on track, we expect the jobless rate to ease to 5.2 per cent by end year and fall to 4.8 per cent in mid 2022.

Definition of employment

• In collecting data for the job market survey the ABS says “The interviews are generally conducted during the two weeks beginning on the Sunday between the 5th and 11th of each month. The information obtained relates to the week before the interview (i.e. the reference week).” In July 2021, Sunday fell on the 11th day.

• There are a number of criteria for a person to be judged as employed, but for the purposes of lockdowns the key points are that there were: “Were employees who had a job but were not at work and were: either away from work for less than four weeks up to the end of the reference week; or away from work for more than four weeks up to the end of the reference week and received pay for some or all of the four week period to the end of the reference week. Were owner managers who had a job, business or farm, but were not at work.”

Published by Craig James, Chief Economist, CommSec