There is a grudging consensus about the trajectory of Australia’s jobs outlook: most see it improving and continuing to improve into 2022. That is where the consensus ends, with some widely different projections of the likely unemployment, participation and other key measures. This is a matter that will quickly go from debating point to reality when the JobKeeper program ends in one month’s time.
Despite its limitations, our attention is always drawn to the unemployment rate as the headline measure of the state of employment in Australia.
For most, the unemployment rate of 6.6% at the end of December (in from 6.8% a month earlier) was unexpected at the height of the pandemic in March and April 2020, but that good result, shown in the chart below, is still painfully higher than the 5.2% recorded in March 2020.
To go straight to the dashboard and take a closer look at the data, click here.
The unemployment rate is clearly dropping and the number of people out of work is also falling.
Speaking to the National Press Club in early February, RBA Governor Philip Lowe reminded us that the RBA had forecast unemployment would be above 7% at the end of 2022. Lowe slated that home to the Government’s fiscal stimulus package – of which the eponymous JobKeeper program is a central pillar. He would do that, given the RBA’s role in helping to shape the package, but given where we are at, there is a reasonableness to the Governor’s comments.
What is really worth noting, is that the conservative banker to the banks was predicting an unemployment rate around 5% in the second half of 2022. That would be either stellar performance, or evidence that the unemployment rate itself is capable of hiding the type of structural adjustments that appear to be going on in the economy.
There are those who continue to argue for JobKeeper to continue. Some do so broadly, as an economy-wide stimulus measure (the Australian Council of Trade Unions has led this charge), while others argue for their ‘special cases’. Tourism is an obvious example.
Ultimately, those arguments are falling on deaf ears. Partly that is because the stimulus program has done its work, and partly because the Government has adopted a different agenda to stimulate the economy.
Sure, there will be more stimulus to come, but right now, the smart money is on increasing the incomes of those without jobs, whose every cent is spent on day-to-day living expenses. It now seems likely that the JobSeeker rate will be increased by around $25 per week, on a permanent basis.
Consumption driven stimulus like that will typically increase demand in the economy and that will translate into employment, of some sort.
We can say ‘of some sort’ because there is evidence that although more people are back in work, the jobs are maybe not all looking, feeling or paying the same as before.
We might get a clue about that from the underemployment and labour underutilisation data. This is the data that combines those without a job, with those in a job who would like more hours. It is yet to fully recover, but the labour underutilisation rate had fallen to 15.1% in December, down from its deadly peak of 20.2% in May 2020. We can see below that it is tracking above the long-term average of about 14%, but it is headed in the right direction.
To go straight to the dashboard and take a closer look at the data, click here.
Whether the labour underutilisation rate actually returns to its low points is an interesting topic for the Australian economy right now.
One argument would have it that post-recovery, the Australian economy will contain more precarious work – where the link between an employee and their job is more tenuous, involves less certain hours and potentially even less income.
In that context, the increase to the JobSeeker allowance makes even more sense. The safety net might need to catch a few more people than pre-pandemic.
A softer than expected hit on the Australian job market, and a faster than expected recovery, could not be achieved without some collateral damage. It might well be that some of that is being taken up in the employment data, but right now, the nation is in a pretty good place, all things considered.
