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Unemployment rate drops, defying forecasts

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Official ABS figures released today show that the unemployment rate has fallen to 6.8 per cent in August, down from 7.5 per cent in July. This drop contrasts widespread predictions of rising unemployment.

Despite stage 4 lockdowns in Melbourne and stage 3 lockdowns across regional Victoria, national employment increased by 111,000 people between July and August. This takes employment back to its July 2018 figures.

“The large increase in seasonally adjusted employment coincided with a large decrease in unemployment of 87,000 people, around 55,000 of whom were females,” said Bjorn Jarvis, head of Labour Statistics at the ABS.

Credit: ABS

The employment to population ratio, which measures what proportion of Australia’s working age population is employed (including people who have stopped looking for work), rose by 0.5 pts in July to 60.3 per cent.

Unexpected figures

This drop in unemployment is widely unexpected, with the RBA predicting that unemployment would continue to rise as a result of employment losses in Victoria.

The RBA predicts that the unemployment rate will rise to almost 10 per cent in the December quarter and then gradually decline to around 7 per cent afterwards.

Credit: RBA

Underemployment still an issue

The provision of JobKeeper payments may distort unemployment statistics, as many people are currently employed but working fewer hours. Between July and August, the number of people receiving JobKeeper but not working any hours increased by 1.7 per cent nationally.

Data on underemployment – part-time workers who would like to work more or full-time workers who are not working ordinary hours – revealed that workers are still not working as much as they would like to.

The underemployment rate remained steady at 11.2 per cent, which is 2.7 pts higher than August 2019.

Compared to last year, there are 234,200 less people employed full-time and 104,100 less people employed part-time.

Moreover, the hours worked only increased by 0.1 per cent. The average hours worked per employed person was around 30.8 hours per week.

However Mr Jarvis noted that this modest increase in hours works was buffered by the increase in part-time employment.

“The weaker increase in hours worked has also been reflected in the strength of the increase in part-time employment between May and August, which has been almost eight times greater than the increase in full-time employment.”

Victoria’s effect on the national economy

Jo Masters, EY Chief Economist, noted the “two speed nature of the Australian economy” whereby unemployment figures in Victoria diverged from that of the nation’s.

“Today’s Labour Force data is the latest in a string of numbers showing that economic recovery is continuing to build outside of Victoria, where Stage 4 restrictions continue to hamper economic activity.

“The economy created an impressive 111,000 jobs in August – jobs added in all states and territories except Victoria – and the unemployment rate declined by 0.7 percentage points to 6.8 per cent. One in two people have found employment since the peak disruption back in May.

“Excluding Victoria, that improves to 2 in 3 people. Combined with a solid rise in hours worked in the first two months of the September quarter, it looks increasingly likely that economic activity will avoid a third consecutive quarter of economic contraction and the unemployment rate will peak below 10 per cent. That doesn’t mean the economy won’t need additional support, but strengthens the case to start shifting from response measures to broader aggregate demand measures.”

The unemployment rate has dropped in all states and territories, except Victoria (increased by 0.3 pts to 7.1 per cent), South Australia (remained the same) and Tasmania (increased by 0.3 pts to 6.3 per cent).

The Northern Territory experienced a steep drop (down by 3.3 pts to 4.2 per cent), as did Queensland (down by 1.3 pts to 7.5 per cent) and Western Australia (down by 1.3 pts to 7 per cent).

New South Wales’ unemployment rate dropped by 0.5 pts (to 6.7 per cent) and the Australian Capital Territory’s unemployment rate dropped by 0.4 pts (to 4.2 per cent).


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Ann Wen
Ann Wen
Ann is a journalist at Dynamic Business with a background in commercial law and research. She is interested in SME tax law, public policy and Australian innovation.