Australia’s Unemployment Rate Down Despite 42,000 Jobs Lost in Victoria

September 17, 2020 Updated: September 18, 2020

August has seen the addition of 11,000 jobs across Australia, bringing the unemployment rate down to 6.8 percent from a 22-year high of 7.5 percent in July, according to the Australian Bureau of Statistics (ABS) figures released on Sept. 17.

The employment to population ratio increased by 0.5 percent in August to 60.3 percent, with the number of the unemployed edging down below one million.

Full-time employment increased by 36,200 to 8.58 million people, and part-time work increased 74,800 to 3.99 million people, yet both have dropped significantly compared to the same period last year.

The better-than-expected headline figure highlights the impact of the COVID-19 lockdown on the labour market with Victoria being the only state recording a fall in employment during the month.

“The August data provides insights into the labour market impacts from the Stage 4 restrictions in Victoria,” Bjorn Jarvis, head of Labour Statistics at the ABS, said.

“In addition to the large fall in hours worked, employment in Victoria also decreased by 42,400 people, and the unemployment rate increased to 7.1 percent.”

In contrast, New South Wales, which has managed to contain the virus while easing restrictions, recorded an increase of 51,500 employed people.

Job Pains Still a Problem 

Despite the positive sign of job growth, the latest figures demonstrate the tough challenges dominating the labour market.

The total number of hours worked in August—a more realistic statistic that removes the distortion created by JobKeeper and JobSeeker wage subsidies—rose only 0.1 percent, with a 4.8 percent fall in Victoria offsetting the 1.8 percent increase in other parts of the country.

The flat working hour increase has left the underemployment rate (the ratio of people looking for more hours of work than they got) stuck at 11.2 percent.

The indicator also exposes the weakness in full-time job growth, which was additionally supported by the 1.2 percent decrease in payroll jobs index during the same period.

The ABS defines payroll jobs as “employee jobs” for which payment is reported to the Australian Taxation Office through Single Touch Payroll.

“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,” Jarvis explained.

The ABS chart shows that the August employment growth is mostly attributed to a significant increase in the number of self-employed people as opposed to employees working for companies.

Another weakness evident is the participation rate, which rose only by 0.1 percentage point to 64.8 percent and remains well below the 65.9 percent recorded in March before the first lockdown.

This indicates that more people have given up on looking for jobs since the lockdown due to the lack of confidence in the economic situation.

‘Stunning’ Data But Bumps on the Road Ahead

CommSec Chief Economist Craig James welcomed the August statistics as they show that the government’s job programs are working.

“There is no doubt that this is a stunning set of job figures,” he commented in a note. “More people were looking for jobs in August, more people found jobs, and more employees reconnected to their workplaces.”

“The cherry on top was a drop in the youth jobless rate from 16.3 percent to 14.3 percent. The job programs are clearly working as intended,” he added.

As Victoria starts to ease restrictions, James expects that the unemployment rate will peak well below official forecasts of near 10 percent.

However, he also warns of significant bumps on the road ahead.

“Aussies need to collectively take a deep breath ahead of the wind-down of JobKeeper and JobSeeker schemes over the next six months, “he said.

“The hope is that stronger operating conditions and reduced support payments will encourage workers to re-join the job market.”